<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file number: O-26886
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(Exact name of registrant as specified in its charter)
Delaware 68-0239619
(State or other jurisdiction of (I.R.S. Identification Number)
incorporation or organization)
101 Park Way
Folsom, California 95630
(Address of principal executive office, including zip code)
(916) 353-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Number of shares of registrant's common stock outstanding as of April 30, 2000:
36,731,286
================================================================================
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements......................................... 3
Condensed Consolidated Balance Sheets at March 31, 2000
and June 30, 1999................................................................... 3
Condensed Consolidated Statements of Operations for the three months
and nine months ended March 31, 2000 and 1999....................................... 4
Condensed Consolidated Statements of Cash Flows for the nine months
ended March 31, 2000 and 1999....................................................... 5
Notes to Condensed Consolidated Financial Statements................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................... 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk........................... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................... 17
Item 6. Exhibits and Reports on Form 8-K..................................................... 17
10.8 Master Software License Agreement Between Objective Systems
Integrators, Inc. and Sprint/United Management Company
10.9 License Agreement No. 325 Between Objective Systems Integrators,
Inc. and VoiceStream Wireless Corporation
10.10 Offer Letter of Bud Mullanix
10.11 Severance Agreement of Bud Mullanix
10.12 Indemnification Agreement of Bud Mullanix
10.27 Financial Data Schedule
SIGNATURE
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
OBJECTIVE SYSTEMS INTEGRATORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------------- -----------------
(unaudited) (1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 24,075 $ 15,811
Short-term investments.................................................. 16,667 15,771
Accounts receivable (net of allowance of $2,280 and $1,865)............. 17,396 17,251
Prepaid expenses and other current assets............................... 1,719 1,515
----------------- -----------------
Total current assets................................................. 59,857 50,348
Property and equipment, net............................................... 10,047 11,319
Other assets, net......................................................... 3,017 4,757
----------------- -----------------
Total assets......................................................... $ 72,921 $ 66,424
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 5,945 $ 5,822
Accrued liabilities..................................................... 7,939 6,662
Deferred revenue........................................................ 13,190 10,078
----------------- -----------------
Total current liabilities............................................ 27,074 22,562
Stockholders' equity:
Common stock............................................................ 93,098 86,703
Accumulated other comprehensive income (loss)........................... (987) (917)
Accumulated deficit..................................................... (46,264) (41,924)
----------------- -----------------
Total stockholders' equity........................................... 45,847 43,862
----------------- -----------------
Total liabilities and stockholders' equity........................... $ 72,921 $ 66,424
================= =================
</TABLE>
(1) Information in this column is derived from OSI's audited consolidated
balance sheet as of June 30, 1999.
See notes to condensed consolidated financial statements.
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------------- ---------------------------------
2000 1999 2000 1999
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
License......................................... $10,345 $ 3,932 $24,938 $ 25,618
Service and other............................... 7,024 7,106 21,514 20,963
-------------- ------------- ------------- --------------
Total revenues............................... 17,369 11,038 46,452 46,581
-------------- ------------- ------------- --------------
Cost of revenues:
License......................................... 533 460 1,571 1,394
Service and other............................... 3,732 4,832 11,804 14,194
-------------- ------------- ------------- --------------
Total cost of revenues....................... 4,265 5,292 13,375 15,588
-------------- ------------- ------------- --------------
Gross profit...................................... 13,104 5,746 33,077 30,993
-------------- ------------- ------------- --------------
Operating expenses:
Sales and marketing............................. 7,355 7,748 20,286 22,432
Research and development........................ 4,079 5,975 12,979 15,901
General and administrative...................... 1,743 1,916 4,835 5,062
-------------- ------------- ------------- --------------
Total operating expenses..................... 13,177 15,639 38,100 43,395
-------------- ------------- ------------- --------------
Loss from operations.............................. (73) (9,893) (5,023) (12,402)
-------------- ------------- ------------- --------------
Other income, net................................. 445 344 1,036 1,322
-------------- ------------- ------------- --------------
Income (loss) before income taxes................. 372 (9,549) (3,987) (11,080)
Provision for income taxes........................ 98 23,947 353 23,197
-------------- ------------- ------------- --------------
Net income (loss)................................. $ 274 $(33,496) $(4,340) $(34,277)
============== ============= ============= ==============
Earnings (loss) per share:
============== ============= ============= ==============
Basic........................................... $0.01 $(0.95) $(0.12) $(0.98)
============== ============= ============= ==============
Diluted......................................... $0.01 $(0.95) $(0.12) $(0.98)
============== ============= ============= ==============
Weighted-average shares outstanding:
============== ============= ============= ==============
Basic........................................... 36,296 35,274 35,911 35,010
============== ============= ============= ==============
Diluted......................................... 39,868 35,274 35,911 35,010
============== ============= ============= ==============
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------------------
2000 1999
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................. $(4,340) $(34,277)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................................... 5,806 6,186
Deferred income taxes............................................ -- 22,329
Stock compensation expense....................................... -- 186
Loss on disposal of fixed assets........................................ 40 114
Effect of changes in:
Accounts receivable.............................................. (158) 5,417
Prepaid expenses, other current assets and other assets.......... (206) (168)
Accounts payable................................................. (89) (246)
Accrued liabilities.............................................. 1,539 (743)
Deferred revenue................................................. 3,112 1,743
----------------- ---------------
Net cash provided by operating activities.................... 5,704 541
----------------- ---------------
Cash flows from investing activities:
Sales (purchases) of short-term investments............................. (896) 1,167
Purchases of property and equipment..................................... (2,785) (2,700)
Purchases of other assets............................................... (154) (2,819)
Proceeds from sales of property......................................... -- 702
----------------- ---------------
Net cash used for investing activities........................ (3,835) (3,650)
----------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net............................. 6,395 1,692
Purchase of treasury stock.............................................. -- (2,208)
----------------- ---------------
Net cash provided by (used for) financing activities......... 6,395 (516)
----------------- ---------------
Effect of exchange rate changes on cash.................................... -- 165
----------------- ---------------
Net increase (decrease) in cash and cash equivalents......... 8,264 (3,460)
Cash and cash equivalents:
Beginning of the period................................................. 15,811 24,568
----------------- ---------------
End of the period....................................................... $ 24,075 $ 21,108
================= ===============
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
These unaudited, condensed, consolidated financial statements have been prepared
by Objective Systems Integrators, Inc. ("OSI") under the rules and regulations
of the Securities and Exchange Commission. In accordance with those rules and
regulations, some of the information normally included in financial statements
prepared in accordance with generally accepted accounting principles has been
condensed or omitted. The information in this report reflects all adjustments
that we believe are necessary to fairly state OSI's financial position, results
of operations and cash flows for the periods presented. These adjustments
consist of items that are of a normally recurring nature.
These financial statements should be read in conjunction with the audited
financial statements and their notes contained in OSI's Annual Report on Form
10-K for the fiscal year ended June 30, 1999. Results for interim periods are
not necessarily indicative of the results expected for the full fiscal year or
for any other period.
2. Earnings (Loss) Per Share
Basic net income (loss) per share is computed using the weighted average of
common shares outstanding. Diluted net income (loss) per share is computed using
the weighted-average number of common and common equivalent shares outstanding
during the period. Common equivalent shares are the incremental common shares
that could be issued (using the treasury stock method) following the exercise of
stock options. Common equivalent shares outstanding are not included in the net
loss per share calculations in loss periods as their inclusion would have the
effect of showing a smaller loss per share.
3. Comprehensive Income (Loss)
SFAS No. 130, Reporting Comprehensive Income, requires us to report a new,
additional measure of income. "Comprehensive Income" includes gains and losses
from foreign currency translations and unrealized gains and losses on equity
securities. These items were previously excluded from net income and reflected
instead in stockholders' equity. The following table sets forth the calculation
of comprehensive income (loss):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
------------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
(in thousands) 2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) $ 274 $(33,496) $(4,340) $(34,277)
Foreign currency translation gains (losses) (128) 313 (70) 270
---------------- --------------- --------------- ---------------
Total comprehensive income (loss) $ 146 $(33,183) $(4,410) $(34,007)
================ =============== =============== ===============
</TABLE>
<PAGE>
4. Accounting for Derivative Instruments and Hedging Activities
In June 1998 the Financial Accounting Standard Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as an asset or liability measured at
its fair value. It requires that changes in a derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. It also requires that companies must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000, and cannot
be applied retroactively. We do not expect that it will have a material effect
on our financial position or results of operations.
5. Segment and Geographic Information
We adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, in fiscal 1999. SFAS No. 131 establishes standards for reporting
information in our financial statements about operating segments. Operating
segments are components of an enterprise for which separate financial
information is available that is regularly evaluated by the chief operating
decision maker, or decision making group, in deciding resource allocations and
in assessing performance. Our chief operating decision makers are our Co-Chief
Executive Officers. We conduct our business in one business segment. While our
Co-Chief Executive Officers evaluate results in a number of different ways, they
generally assess financial performance and allocate resources based on product
lines rather than any other measure.
For the quarter ended March 31, 2000, we had two customers that each accounted
for more than 10% of our revenues. For the nine months ended March 31, 2000, we
had one customer that accounted for more than 10% of our revenues. For the
quarter ended March 31, 1999, we had one customer that accounted for more than
10% of total revenues.
The accounting policies related to our product lines are the same as those
described in our form 10-K for the fiscal year ended June 30, 1999.
The following table presents a summary of geographic information:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
---------------------------------------- ----------------------------------
(in thousands) 2000 1999 2000 1999
------- ------- ------- ----
<S> <C> <C> <C> <C>
Revenues:
United States................................. $12,161 $ 5,768 $29,782 $24,820
Europe........................................ 2,928 1,395 7,389 6,645
Asia and Pacific Rim.......................... 2,027 2,359 6,922 8,154
Latin America................................. 253 895 1,964 5,356
Other......................................... -- 621 395 1,606
-------------- -------------- -------------- --------------
Total....................................... $17,369 $11,038 $46,452 $46,581
============== ============== ============== ==============
At March 31
----------------------------------
2000 1999
------ ------
Long-lived assets:
United States................................. $11,608 $15,481
Europe........................................ 162 165
Asia and Pacific Rim.......................... 1,294 1,695
-------------- --------------
Total Consolidated.......................... $13,064 $17,341
============== ==============
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
Some of the statements in this Report are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. They have
been identified with an asterisk (*). Underlying these statements are a number
of assumptions regarding risks, both known and unknown, which may cause our
actual results of or the evolution of our marketplace to differ materially from
what is expressed or implied. These risks include, but are not limited to
general macro and micro economic conditions; governmental policies on
telecommunications deregulation, consolidation and ownership; concentrations of
products, competitors and customers; our ability to grow sales; ability to grow
our customer support and development organizations; competition and
technological change in our industry, both in terms of our customers and our
competitors; protection of intellectual property, particularly in certain
international markets; dependence on third-party relationships; risk of product
defects; fluctuations of quarterly results; and retention of key personnel.
Additional information can be found in Item 1, Notes to Condensed Consolidated
Financial Statements, throughout Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations, and in Item 3, Quantitative and
Qualitative Disclosure About Market Risk.
Overview
OSI develops, markets and sells software products that manage communications
networks for voice and e-services in the evolving communications market. Our
operations support system (OSS) frameworks and applications software is designed
to operate under the umbrella of our Unified Management Architecture(TM)
("UMA(TM)"), which provides the blueprint for integrating the management of our
customer's communications networks, services, applications, and processes. As of
March 31, 2000, we had directly or indirectly licensed our products to more than
250 customers around the world.
We were founded in June of 1989 and began shipments of our NewExpert(R) product
line in August of 1990. In fiscal 1999, we announced our next-generation
products: NetExpert Virtual Service Management(TM) ("VSM(TM)") and NetExpert
Virtual Process Management(TM) ("VPM(TM)") frameworks and NetExcel(TM) solution
series. We delivered this initial set of products integrated under UMA in fiscal
2000.
Revenue from licenses, service and support of our NetExpert product line has
accounted for substantially all of our revenues since we were founded. A
typical NetExpert sale generally includes a combination of license fees, fees
for professional services, and fees for customer support and training. We
believe that substantially all of our revenues for the foreseeable future will
be derived from the license, service, and support of our NetExpert product
line.* In addition, a significant portion of revenues has been, and will
continue to be, derived from substantial orders placed by large organizations.*
The timing of these orders and their fulfillment has caused, and may in the
future cause, material fluctuations in our revenues and operating results,
particularly on a quarterly basis.* As a consequence, we believe that period-
to-period comparisons of revenue and results of operations are not necessarily
meaningful and that quarterly revenues should not be relied on as an indicator
of future performance.*
We distribute and sell our products to end-users in North America primarily
through a direct sales organization. Outside of North America, we sell through
systems integrators, local value-added resellers and, to a lesser extent, an in-
region direct sales force. We intend to continue growing our sales and support
operations by expanding our direct sales force, opening new in-region offices,
adding value-added resellers, and pursuing additional strategic relationships.*
See further discussion in the "Results of Operations" section below.
<PAGE>
For the third quarter of fiscal 2000, we had a net profit of $0.3 million
compared with a net loss of $33.5 million for the same period in fiscal 1999.
Some of the factors that contributed to this result are described in the
following "Results of Operations" section. We are following a strategy aimed at
meeting the service management, network management, and process integration
needs of communications services providers. In fiscal 1998 and 1999, we placed
heavy emphasis on development of new products that can be integrated under our
Unified Management Architecture. In fiscal 2000, we are continuing to 1) launch
our new product lines, 2) build stronger sales and customer interface
organizations, and 3) forge new strategic alliances while strengthening our
existing relationships.* While we believe this strategy is helping us grow our
revenues and backlog of orders, we can give no assurances that this strategy
will continue to be successful.* Some orders we include in our backlog may be
cancelled without significant penalty.
Results of Operations
Revenues:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
-------------------------------------- ----------------------------------------
(in thousands, except
percentages) 2000 Change 1999 2000 Change 1999
--------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
License..................... $ 10,345 163% $ 3,932 $ 24,938 (3%) $ 25,618
Percentage of revenues...... 60% 36% 54% 55%
Service and other........... $ 7,024 (1%) $ 7,106 $ 21,514 3% $ 20,963
Percentage of revenues...... 40% 64% 46% 45%
Total revenues.............. $ 17,369 57% $ 11,038 $ 46,452 (0%) $ 46,581
</TABLE>
Our revenues are derived from license fees and fees for services that complement
our products, including professional services, software support, customer
support, and training. The increase in total revenues for the three-month ended
March 31, 2000, compared with the three-month period ended March 31, 1999,
resulted primarily from an increase in orders related to the introduction of our
new products. Total revenues remained flat for the nine-months ended March 31,
2000, compared to the nine-month period ended March 31, 1999. List prices for
our products and services did not change significantly during the comparison
periods. However, we have instituted a new pricing model that provides our
customers with additional choices when licensing our software. This change
could negatively impact our short-term revenues if we are not able to attract
sufficient volume to offset our lower entry prices.*
License Revenues. Software licenses have historically been granted and priced
on a per-server basis, although we have granted site, networkwide or
enterprisewide licenses for larger installations. Our new pricing model is based
on product performance and usage levels. It is designed to provide our customers
with greater flexibility when selecting and licensing our products.* We
generally recognize license revenues when a noncancellable license agreement has
been signed, product has been shipped, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable, and collection is
probable. We also recognize revenue under contracts requiring significant
customization using the percentage-of-completion method of contract accounting,
based on ratios that measure the work completed relative to the total project
work to be done. Although our license agreements typically do not provide for a
right of return, we maintain reserves for returns and potential credit losses.
License revenues increased in absolute dollars and as a percentage of total
revenues for the three-month period ended March 31, 2000, compared with the
three-month period ended March 31, 1999. This increase was due to an increase in
orders from both new and existing customers. License revenues remained
relatively flat for the nine-month period ended March 31, 2000, compared with
<PAGE>
the nine-month period ended March 31, 1999. We are continuing to increase the
size and competency of our direct sales force and to build relationships with
current and new distribution channel partners. We added additional sales staff
during the third fiscal quarter and expect to continue doing so during the
fourth fiscal quarter.* However, given the significant number of new products
we have introduced, the need to train our sales and support personnel in those
products and the relatively short average tenure of our direct sales force,
historic per-salesman productivity rates will be difficult to achieve in the
near term.*
Services and Other Revenues. We recognize revenues for training, consulting and
professional services as the services are performed and acceptance criteria are
met. We offer support contracts to our customers. These contracts provide
telephone support, updates and maintenance of our products during the support
period. Revenues from our support contracts are deferred and recognized ratably
over the term of the support agreement. Payments for support fees are generally
made in advance and are nonrefundable. Services and other revenues remained
relatively flat for the three-month period ended March 31, 2000, compared with
the three-month period ended March 31, 1999. The growth in our service and
other revenues in the nine-month period ended March 31, 2000, compared with the
nine-month period ended March 31, 1999, is due to an increased level of
professional services and project completion during the current fiscal year.
We expect that services and other revenues will continue to represent a
significant portion of our total revenues in future periods.* We anticipate
continued demand for professional services in connection with the licensing of
our products, renewal of existing support contracts and incremental support
revenues, attributable to a growing installed base.* We also believe that
historic growth rates for services and other revenues should not be relied on
as an indication of future growth rates.*
International Revenues. Revenues from outside the United States represented
30% and 48% of total revenues for the three months ended March 31, 2000, and
1999, respectively. Revenues from outside of the United States represented 36%
and 47% of total revenues for the nine months ended March 31, 2000, and 1999,
respectively. The decrease in international revenues as a percentage of total
revenues was mainly caused by our receipt of a large order from one North
American customer during the three month period ended March 31, 1999.
The European communications market is growing, as privatization in the region
continues to create a more competitive service provider market. We have been
building our European operations in anticipation of the opportunity for
increased business in this market and expect to continue doing so for the
remainder of the fiscal year.*
We also expect that our international revenues will continue to account for a
material portion of our total revenues in future periods.* International
business involves a number of inherent risks, including longer receivable
collection periods, greater difficulty in collections, fluctuations in the
real cost of services given changes in relative exchange rates, difficulty in
staffing and managing operations, a longer sales cycle, potentially unstable
political and economic conditions, unexpected changes in regulatory
requirements, including a slowdown in the rate of privatization of
telecommunications services, reduced protection for intellectual property
rights, potentially adverse tax consequences, and tariffs and other trade
barriers. In addition, access to foreign markets is sometimes difficult due to
the established relationships between government-owned or government-
controlled communications providers and local suppliers of communications
products. As a result, we may not be able to continue penetrating
international markets successfully. In addition, we cannot give assurances we
will be able to sustain or increase revenue from international licensing and
services or that the factors listed above will not adversely affect our future
international business. Any of these factors could have a material, adverse
effect on our business, operating results and financial condition.*
<PAGE>
Cost of Revenues:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
---------------------------------------------- ---------------------------------------------
(in thousands, except
percentages) 2000 Change 1999 2000 Change 1999
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cost of license revenues..... $ 533 16% $ 460 $ 1,571 13% $ 1,394
Percentage of revenues....... 3% 4% 4% 3%
Cost of service and other.... $ 3,732 (23%) $ 4,832 $ 11,804 (17%) $ 14,194
Percentage of revenues....... 21% 44% 25% 30%
Total cost of revenues....... $ 4,265 (19%) $ 5,292 $ 13,375 (14%) $ 15,588
Percentage of revenues....... 25% 48% 29% 33%
Gross profit................. $ 13,104 128% $ 5,746 $ 33,077 7% $ 30,993
Percentage of revenues....... 75% 52% 71% 67%
</TABLE>
Cost of License Revenues. Cost of license revenues consists primarily of
license fees paid to third-party software vendors and the costs of product media
and duplication, manuals, packaging materials, shipping expenses, amortization
of capitalized software costs, and related labor costs. For the three months
ended March 31, 2000, compared with the three months ended March 31, 1999, cost
of license revenues increased as a result of the increase in our license
revenues. For the nine months ended March 31, 2000, compared with the nine
months ended March 31, 1999, cost of license revenues increased due to higher
than normal costs related to amortization of capitalized third party software in
the three-month period ended September 30, 1999.
Cost of Service and Other Revenues. Cost of service and other revenues consists
primarily of personnel costs related to the professional services and
maintenance services we provide in connection with our products. It also
includes outside service fees paid to third-party providers of professional
services, related travel costs and overhead. Our cost of service and other
revenues decreased for both the three-month and the nine-month periods ended
March 31, 2000, compared with the three-month and nine-month periods ended March
31, 1999. This decrease was primarily due to reduced headcount and associated
personnel and overhead costs. Facilities costs were also decreased as a result
of reduced leasing expenses. However, the decrease was offset to a certain
extent by increased outside labor costs for services performed on customer
projects. Costs of services performed for maintenance services remained flat in
both three-month and nine-month comparison periods. We believe that, in the
future, the cost of service and other revenues may increase in absolute dollars
if additional headcount or outside services are required.*
Gross profit increased for the three months ended March 31, 2000, as compared to
the three months ended March 31, 1999, as a result of increased license revenues
and decreased professional services costs. Gross profit increased for the nine
months ended December 31, 2000, as compared with the nine months ended March 31,
1999, primarily due to decreased costs in our professional services
organization. We expect to continue maintaining a gross profit in our
professional services segment.* However, if our costs of providing services
were to increase faster than our services revenues, losses could occur in the
future.*
Operating Expenses:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
--------------------------------------------- ----------------------------------------------
(in thousands, except
percentages) 2000 Change 1999 2000 Change 1999
----------- ----------- ----------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing........... $ 7,355 (5%) $ 7,748 $ 20,286 (10%) $ 22,432
Percentage of revenues........ 42% 70% 44% 48%
Research and development...... $ 4,079 (32%) $ 5,975 $ 12,979 (18%) $ 15,901
Percentage of revenues........ 24% 54% 28% 34%
General and administrative.... $ 1,743 (9%) $ 1,916 $ 4,835 (4%) $ 5,062
Percentage of revenues........ 10% 17% 10% 11%
Total operating expenses...... $ 13,177 (16%) $ 15,639 $ 38,100 (12%) $ 43,395
Percentage of revenues........ 75% 141% 82% 93%
</TABLE>
Sales and Marketing. Sales and marketing expenses consist mainly of salaries,
commissions and bonuses for sales and marketing personnel, facilities costs
associated with sales and customer support offices, promotional expenses and
contract administration. These expenses decreased for the three months ended
March 31, 2000, compared with the three months ended March 31, 1999. Sales and
marketing expenses also decreased for the nine months ended March 31, 2000,
compared with the nine months ended March 31, 1999. The decrease in sales and
marketing costs for the quarter ended March 31, 2000, compared to the quarter
ended March 31, 1999, is the result of restructuring costs incurred during the
third quarter of fiscal year 1999. The decrease in costs for the nine-month
period ended March 31, 2000, compared to the same period in fiscal year 1999, is
a result of decreased headcount for sales and marketing. Marketing costs also
decreased because we discontinued the services of various outside vendors. We
also reduced travel, facilities, telephone and computer related expenses
during the period. We expect that sales and marketing expenses in future periods
will increase both in absolute dollars and as a percentage of revenues due to
our active hiring program and to agreements with various partners who are
involved in the marketing of our products.*
Research and Development. Research and development expenses consist mainly of
personnel costs for product research, development and quality assurance.
Research and development expenses decreased for the three months ended March 31,
2000, compared with the three months ended March 31, 1999. Research and
development expenses also decreased for the nine months ended March 31, 2000,
compared with the nine months ended December 31, 1999. Decreases in both
comparison periods resulted from reductions in headcount and related expenses,
such as travel and computer operations. We expect that we will continue
committing significant resources to research and development to enhance and
extend our core technology and product lines.* Although we are committed to
controlling expenses in research and development, these expenses may increase in
absolute dollars or as a percentage of total revenues.*
General and Administrative. General and administrative expenses consist mainly
of personnel costs for finance, human resources, legal affairs and general
management. Also included are outside legal and accounting fees, corporate
insurance expenses and allowance for doubtful accounts. General and
administrative expenses decreased in both the three-month and nine-month periods
ended December 31, 2000, compared with the three-month and nine-month periods
ended December 31, 1999. The relative decrease relates to an additional reserve
for doubtful accounts we established in the third fiscal quarter of 1999. We
expect that general and administrative expenses may increase in the future with
the hiring of additional personnel and possible increased use of outside
services.* Although we believe our allowance for doubtful accounts is adequate
as of March 31, 2000, we will continue to review this allowance and adjust it as
needed. This could result in additional charges to general and administrative
expenses.*
Other Income, Net:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
---------------------------- ---------------------------------------------
(in thousands, except
percentages) 2000 Change 1999 2000 Change 1999
------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Other income, net........... $ 445 29% $344 $1,036 (22%) $1,322
Percentage of revenues...... 3% 3% 2% 3%
</TABLE>
Other Income, Net. Other income net consists primarily of interest income,
gains or losses on foreign exchange, and miscellaneous bank charges. The
increase in other income, net was primarily due to the increase in average
levels of cash for the quarter resulting in higher interest income. However,
other income, net decreased in the nine-month comparison period primarily due
to the lower average levels of cash and cash equivalents during the first six
months of the current fiscal year as compared to the first six months of the
previous fiscal year. In addition, there was an increase in the loss
associated with foreign currency fluctuations during the nine-month period
ended March 31, 2000.
Provision for Income Taxes:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31,
--------------------------------- --------------------------------
(in thousands, except
percentages) 2000 Change 1999 2000 Change 1999
-------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Provision for
income taxes............... $98 (100%) $23,947 $353 (98%) $23,197
Percentage of revenues...... 1% NM 217% 1% NM 50%
</TABLE>
NM -- Not meaningful
Provision For Income Taxes. Provision for income taxes includes federal, state
and foreign income taxes. For the period ended March 31, 1999, we had a $27.4
million charge for a valuation allowance related to our deferred income tax
asset. This allowance was established in accordance with the guidelines in SFAS
No. 109, Accounting for Income Taxes. For the three months and nine months
ended March 31, 2000, the provision for income taxes represents state and
foreign taxes.
Year 2000 Readiness
To date, we have not experienced any significant Year 2000 problems with our
internal systems or our customers' systems. However, we continue to assess the
extent to which our systems and products correctly evaluate date information
("Year 2000-compliant"). We have taken remedial action whenever we were able
to identify any systems and products that were not Year 2000-compliant and
expect to continue monitoring this area throughout the remainder of the fiscal
year.*
Despite having neither experienced or received reports of customer problems
over the Year 2000 transition, we can give no assurances that problems will
not occur or that our products will continue to function properly when
integrated with other third-party products. If our products are part of a
system that is not able to manage and manipulate data related to the Year
2000,or if residual Year 2000 problems cause the failure of the technologies,
software or systems necessary to operate our business, we could lose
customers, suffer significant disruptions in our business, lose revenues and
incur substantial liabilities and expenses. The results could have a material
adverse effect on our business.*
We have incurred costs related to our Year 2000 readiness program but have not
maintained separate cost accounting for them. Our Year 2000 readiness efforts
were undertaken by existing employees, and the associated costs were treated
as normal operating expense. As of March 31, 2000, we estimate these costs
were approximately $8.0 million. This does not include potential costs related
to customer or other claims, or costs related to internal software and
hardware replaced in the normal course of our business. We do not expect to
incur significant additional costs for our Year 2000 readiness program and
believe we have adequate general corporate funds to pay for any expected costs
or expenditures related to Year 2000 readiness.*
We have provided our customers with limited assurances regarding those of our
products that are Year 2000-compliant. Except as specifically provided for in
our contracts and other limited, written assurances that we provided, we do not
believe that we are legally responsible for costs that may be incurred by our
customers to ensure the Year 2000 compliance of their software, systems and
operations.* Our customer agreements typically contain provisions designed to
limit our liability for these types of claims. However, it is possible that
these provisions will not provide adequate protection from liability under
applicable law or unfavorable judicial decisions.* Even if we have disclaimed
responsibility for Year 2000 problems, our customers may nevertheless make
claims against all suppliers of the component parts of their operating
environment.* Any Year 2000 claims, whether with or without merit, could result
in a material adverse effect on our business, financial condition and results of
operations.*
Factors That May Affect Future Results
Quarterly Results. Our quarterly operating results have varied significantly in
the past and can be expected to vary significantly in the future.* The
fluctuation in quarterly license revenues is caused by the timing of large
orders by our customers, including global telecommunication providers and new,
emerging communication service providers. Orders are typically preceded by long
sales cycles and, accordingly, it has been and will continue to be difficult to
predict when they will be received.* We expect that quarterly license revenues
will continue to vary significantly depending on the timing of our orders.* The
failure to obtain a large order during any given reporting period, for whatever
reason, would have a material adverse effect on our business.
We typically receive a significant portion of our orders, and record the
resulting revenue, in the last month of a quarter, and frequently in the last
weeks or even days of a quarter. Expense levels are based, in part, on our
expectations of future revenues. If actual revenues are below expectations,
operating results can be adversely affected. In particular, because only a
small portion of our expenses vary with revenue, net income may be
disproportionately affected if anticipated revenues are not realized. We
believe this customer buying pattern will continue.*
Our quarterly operating results have also varied and will continue to vary
significantly from quarter to quarter based on factors such as the capital
spending patterns of our customers; changes in our pricing policies or those of
our competitors; increased competition; cancellation of licenses or support
agreements; changes in operating expenses; personnel changes; fluctuation in
product demand; the number, timing and significance of new products and product
enhancements by us and by
<PAGE>
our competitors; our ability to develop, introduce and market new and enhanced
versions of our products in a timely manner; the mix of direct and indirect
sales; our assessment of our allowance for doubtful; sales returns; and general
economic factors, among others.*
Because of these factors, quarterly revenue and operating results have been and
will continue to be difficult to forecast.*
Sales Cycle. Revenues are also difficult to forecast because the sales cycle,
from initial evaluation to product installation, varies substantially from
customer to customer. Purchase of an OSS application generally involves a
significant commitment of capital, with the attendant time requirements often
associated with a customer's internal approval procedures. It also involves the
need to test and accept new technologies that affect crucial operations. For
these and other reasons, the sales cycle for our products is typically lengthy
and subject to a number of significant risks over which we have little or no
control.
Key Personnel. Our future success depends, to a significant degree, on the
continuing contributions of key management, sales, professional services,
customer support and product development personnel.* The loss of, or the
inability to attract and retain, key personnel could adversely affect our
business.* We have experienced and continue to experience difficulty in
recruiting qualified personnel. Competition for qualified employees is intense
in the software industry, and there can be no assurance that we will be
successful in attracting and retaining the people we need. The complex nature
of our customers' networks requires that we recruit and hire personnel with
expertise in, and a broad understanding of, the telecommunications industry.
There are only a limited number of qualified personnel available for employment.
Failure to attract and retain key personnel would have a material adverse effect
on our business condition.*
Growth. To compete effectively and manage future growth, we also need to
improve our internal operational, financial and management information systems,
procedures and controls in a timely manner. Management of future growth also
means that we must expand, train, motivate and manage our workforce. We can
give no assurances that our personnel, systems, procedures and controls will be
adequate to support existing and future operations. The failure to improve
operational, financial and management systems, or to expand, train, motivate and
manage employees, could have a material adverse effect on our business.*
Product Defects. Software products as complex as those we offer are likely to
contain defects when they are introduced or when new versions are released.
Although we are not aware of any material software defects in our products, we
can give no assurances, despite extensive testing both by us and by our
customers, that errors will not be found after commercial licensing begins.
This could result in delayed or lost revenue, loss of market share or failure to
achieve market acceptance.* Any of these could have a material adverse effect
on our business.
Competition. Our products are designed for use in an evolving network
operations support and management applications market. Competition in this
market is intense, with customer consolidation and resulting network operations
convergence, rapidly changing technologies, evolving industry standards,
frequent new product introductions and rapid changes in customer requirements.
Our competitors offer a variety of solutions to address this market. We believe
that competition has increased and will continue to increase.* Additionally,
some of our customers regularly evaluate whether to design and develop their own
network operations support and management applications or to acquire them from
outside vendors. There can be no assurance that our current or potential
competitors will not develop lower-cost products that are comparable or superior
to ours or that they will not be able to adapt more quickly than we are to new
technologies, evolving industry trends or changes in customer requirements. If
we are not able to compete successfully against current and future competitors,
our business will be materially and adversely affected.
<PAGE>
International Business. We expect that our international business will continue
to account for a significant portion of total revenues in future periods.* We
intend to continue expanding our operations outside of North America.* This
will require significant management attention and the expenditure of significant
financial resources.* The result could adversely affect our operating margins
if the investments are not accompanied by sufficient revenue growth.
Historically, our transactions have been primarily in U.S. dollars. However, as
we further expand our operations outside the United States, transactions in non-
U.S. currencies are likely to increase.* This will result in a corresponding
increase in our exchange rate risk. If exchange rates change unfavorably, this
could result in charges to operations. Although we have tried to reduce the risk
of fluctuations in exchange rates by pricing our products and services in U.S.
dollars whenever possible, we pay our local expenses in local currencies. We do
not engage in hedging transactions with respect to those obligations. Currency
exchange fluctuations in countries where we license our products could have a
material adverse effect on our business by making our pricing noncompetitive
with products priced in local currencies.*
Reseller Relationships. A key element of our business strategy is to expand our
distributor, systems integrator and value-added reseller channels. We are
currently investing, and plan to continue investing, significant resources to
develop these channels of distribution.* We can give no assurances that we will
be able to attract partners who can market our products effectively. If we are
unable to develop these relationships or if our partners are unable to market
our products effectively, our business operating results and financial condition
would be materially and adversely affected.*
Proprietary Technology. Our success and ability to compete depends in large
part on our proprietary software technology. To protect our proprietary rights,
we rely on a combination of various technical measures, as well as trade secret,
copyright and trademark laws. We also rely on nondisclosure agreements and other
contractual arrangements. Despite our efforts, unauthorized parties may attempt
to copy our products or to obtain and use our proprietary information.* The
steps we have taken may be insufficient to prevent misappropriation of our
technology. Our precautions may not preclude competitors from developing
products with functionality or features that are similar to those in our
products. In addition, effective copyright and trade secret protection may be
unavailable or limited in certain countries outside the United States. While we
believe that our products and trademarks do not infringe upon the proprietary
rights of third parties, infringement claims may arise in the future as the
number of products and competitors in our industry increases. Any such claim,
with or without merit, could be time-consuming, result in costly litigation and
divert the attention of our technical and management personnel.* This could
result in a material adverse impact on our business.*
Third-Party Software. Finally, we rely on software licensed from third parties,
including software that is integrated with internally developed software and
used to perform key functions. The continued availability of this software
cannot be assured. Nor can we give assurances that, on expiration of our current
agreements, renewals will be on commercially reasonable terms. Absence of these
licenses could have a material adverse effect on our business.*
Based upon all of the above, we believe that our quarterly revenues and
operating results may vary significantly in the future.* We also believe that
period-to-period comparisons of results are not necessarily meaningful and
should not be relied on as indications of future performance.* Further, we
believe that it is likely that our revenue or operating results will be below
the expectations of public market analysts and investors in some future
quarter.* If this occurs, the price of our Common Stock could be materially,
adversely affected.*
<PAGE>
Liquidity and Capital Resources
For the nine-month period ended March 31, 2000, cash and cash equivalents
increased by $8.3 million compared to a decrease of $3.5 million for the nine-
month period ended March 31, 1999. Net cash provided by operations was $5.7
million compared to $0.05 million for the nine-month period ended March 31,
1999. During the period, net cash used for investing activities remained flat
compared to the nine-month period ended March 31, 1999. This resulted from
increased purchases of short-term investments accompanied by a decrease in the
purchases of property and equipment during the nine-month period ended March 31,
2000. Cash provided by financing activities was $6.4 million. This change
resulted from the exercise of employee stock options. We currently expect to
make capital expenditures of between $4.0 million and $6.0 million in the next
twelve months, primarily for the purchase of computer equipment and related
software.* These purchases will be financed through current working capital,
cash generated from operations and cash provided by financing activities.
In September of 1998, our Board of Directors authorized a stock repurchase
program under which we could purchase up to 1,000,000 shares of our common
stock. As of March 31, 2000, we had repurchased on the open market
approximately 493,300 shares of our common stock at an average purchase price of
$4.47, for a total cost of approximately $2.2 million. We may continue to
repurchase shares in the future.*
As of March 31, 2000, we had working capital of approximately $32.8 million,
including $40.7 million in cash, cash equivalents and short-term investments. In
addition, we have a $2.5 million unsecured revolving line of credit that expires
in December 2002. Under our line of credit, borrowings bear interest at either
(a) a fluctuating rate equal to the prime lending rate in effect, or (b) a fixed
rate that is 2% above the London Inter-Bank Offered Rate. As of March 31, 2000,
we had not borrowed under our line of credit.
Some of our accounts receivable are beyond their payment terms. We maintain an
allowance for doubtful accounts that we believe is adequate to cover potential
credit losses.* On March 31, 2000, our reserves for doubtful accounts and sales
returns were $2.3 million. We believe our present reserves are adequate to
provide for potential credit losses or sales returns.*
We intend to continue growing our operations.* In the nine months ended March
31, 2000, we spent $2.8 million for capital items, principally computer
equipment and leasehold improvements. We expect that capital expenditures will
continue to be significant in fiscal 2000 and in the future.*
We believe that our cash balances and cash flow from operations are sufficient
to support our working capital requirements for at least the next twelve
months.* Thereafter, if cash generated from operations cannot satisfy our
working capital requirements, we may need to raise additional funds. Financing
may not be available or, if it is, may not be obtainable on terms favorable to
us or our stockholders.* If we raise additional capital by issuing equity or
convertible debt securities, ownership dilution to stockholders will result. If
funds are unavailable, our business may be adversely affected.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk
<PAGE>
Our exposure to market rate risk based on a change in interest rates relates
primarily to our investment portfolio, which consists of cash equivalents and
short-term investments. Cash equivalents are highly liquid investments with
original maturities of three months or less and are stated at cost. We do not
believe our exposure to interest rate risk is material for these balances, which
were $21.7 million on March 31, 2000. The securities in our short-term
investment portfolio are generally classified as available-for-sale. Short-term
investments were $16.7 million on March 31, 2000. We do not use derivative
financial investments in our short-term investment portfolio. We place our
investments with high-quality issuers and, by policy, limit our credit exposure
to any one issuer. We are adverse to principal loss and attempt to ensure the
safety of our investment funds by limiting default, market and reinvestment
risk. If market interest rates were to change immediately and uniformly by 10%
from the rates in effect on March 31, 2000, the fair value of our cash
equivalents and short-term investments would change by an insignificant amount.
Foreign Currency Exchange Rate Risk
As a global business, we face exposure to adverse movements in foreign currency
exchange rates. These exposures may change over time as business practices
evolve, and they could have a material adverse impact on our business, operating
results and financial position.* Historically, our primary exposure has related
to local currency expenses in Europe and the Asia-Pacific region, including
Australia. The functional currencies of our foreign subsidiaries are local. A
hypothetical 10% change in foreign currency rates would have an insignificant
impact on our business, operating results and financial position.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be a party to litigation incident to the ordinary
course of our business. As of the date of this Report, we do not believe that
there is material litigation pending against OSI. However, any litigation
involving OSI, whether we are the plaintiff or defendant and regardless of the
outcome, could result in substantial costs and significant diversion of effort
by our technical and management personnel. In addition, we can give no
assurances that material litigation, either by or against OSI, will not be
necessary to resolve issues that may arise in the future. Given the
uncertainties of litigation, any litigation could have a material adverse effect
on our business, financial condition or operating results.*
Reference is made to proceedings filed against OSI with the Bureau de
Conciliation in Grasse, France by Patric R. Olenczak, a former employee of OSI,
which is ongoing and previously disclosed in OSI's Quarterly Report on Form 10-Q
for the period ending September 30, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.8 Master Software License Agreement Between Objective Systems
Integrators, Inc. and Sprint/United Management Company*
10.9 License Agreement No. 325 Between Objective Systems Integrators,
<PAGE>
Inc. and VoiceStream Wireless Corporation*
10.10 Offer Letter of Bud Mullanix
10.11 Severance Agreement of Bud Mullanix
10.12 Indemnification Agreement of Bud Mullanix
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
* Confidential treatment has been requested with respect to certain portions
of this Exhibit. Omitted portions have been filed separately with the SEC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OBJECTIVE SYSTEMS INTEGRATORS, INC.
Dated: May 12, 2000 By: /s/ Lawrence F. Fiore
-------------------------------
Lawrence F. Fiore, Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
<PAGE>
EXHIBIT 10.8
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE PORTIONS OF THE
AGREEMENT INDICATED BY AN ASTERISK (*). A COMPLETE COPY OF THIS AGREEMENT,
INCLUDING THE REDACTED TERMS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
MASTER SOFTWARE LICENSE AGREEMENT
BETWEEN
OBJECTIVE SYSTEMS INTEGRATORS, INC. AND
SPRINT/UNITED MANAGEMENT COMPANY
THIS MASTER SOFTWARE LICENSE AGREEMENT (the "Agreement") is made and entered
into, effective as of March 31, 2000 (the "Effective Date"), by and between
Objective Systems Integrators, Inc., a Delaware corporation ("OSI"), and
Sprint/United Management Company, a Kansas Corporation ("Sprint"). The term "
Agreement," as used herein, will collectively refer to this Master Software
License Agreement, together with the Schedule (as hereafter defined), and any
and all Attachments or Exhibits attached hereto and incorporated herein by this
reference.
WHEREAS, OSI wishes to grant to Sprint, and Sprint desires to obtain from OSI,
certain license rights to OSI's software products, as more particularly
described below, in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree to the following terms and conditions, which set forth the rights,
duties, and obligations of the parties.
1. Definitions
"Application Component" means OSI Software, other than NetExpert Framework
Products, licensed as a single off the-shelf application component such as
FM Exel(TM), including only those off-the-shelf Rulesets provided as part of
that application component.
"Authorized Computer" means a computer identified by type and serial number
in an Order or a notice following an Order.
"Combined Software" computer code, modules, programs, data files or rules,
including related documentation, resulting from (1) some or all of the same
being linked, combined or otherwise operated with OSI Software, or (2)
Sprint's modification of OSI Software.
"Core Function" means the original purpose, action, or focus for which
the Product was originally developed.
"Deliverables" means materials such as OSI Software and Manuals specifically
described as deliverables in a Statement of Work.
"Developed Programs" means only the application software program(s),
scripts, templates, dialogues, and interfaces produced by Sprint through the
use of the Toolkit(s) (defined below). Sprint shall retain all right,
interest in and title to Developed Programs.
"Information" means written, machine-reproducible and visual materials that
are described in this Agreement, or are clearly marked when disclosed, as
being confidential, together with all written, visual and oral materials so
identified in writing within 30 days after their disclosure.
"Installation Date" means the business day OSI declares Products ready for
use if installed by OSI, or the business day after Products are delivered,
if they are to be installed by Sprint.
"Manuals" means user manuals and similar documentation listed in an Order or
supplied with OSI Software or Vendor Software. Manuals do not include
product and service descriptions, advertising or marketing materials.
"NetExpert Framework Product" means OSI Software specifically listed in the
Price List as part of the NetExpert(R) network management Framework.
"New Use" means use of OSI or Vendor Software: (1) On other than its
Authorized Computer; (2) On its Authorized Computer if the use is (a) for
more than the authorized maximum number of concurrent processes or other
restrictions set forth in the Price List, (b) for a code type or with
operating system or database software other than that authorized, or (c) not
in conformity with the other factors used to set pricing for the initial use
of that Software under the Order establishing that use.
Page 1 of 20
<PAGE>
"Order" means a Contract Order, Purchase Order, or such other Sprint-
authorized ordering document executed by Sprint or any Affiliate (as
hereafter defined) so that Sprint or such Affiliate may license the software
and/or purchase the services offered under this Agreement. Any Order used to
purchase VPS (as defined herein) shall set forth the terms upon which
Professional Services will be provided by OSI to Sprint, including the
Statement of Work. If the terms of an Order directly conflict with the terms
of this Agreement, the terms of the Order will govern.
"OSI Software" means computer code, modules, programs, data files and rules
listed as OSI Software in the Price List, or provided to Sprint by OSI as
Deliverables or otherwise in connection with Services or otherwise. OSI
Software does not include Vendor Software.
"Price List" means the OSI price list in effect on the date an Order is
accepted and approved for use in the region where the Products are to be
installed. OSI may change the Price List, including available Products,
specifications and prices, on notice to Sprint.
"Products" means NetExpert Framework Product, Application Component,
Combined Software, OSI Software, other Deliverables, Vendor Software and
Manuals.
"Professional Services" or "VPS" means consulting services, or other such
services not included in Support Service, but related to OSI Software to be
provided by OSI to Sprint, which include, but are not limited to, service
level definition, solution design, software installation, deployment and
integration assistance, business process re-engineering, and development
activities, as further described in the applicable Order containing a
Statement of Work, which will be signed by both parties.
"Ruleset" means a group of instructions which, when taken as a whole,
constitute a decision-making matrix used to direct the functions of
NetExpert Framework Products for a specific network element, management
operation or other application.
"Schedule" means the Product Schedule, as applicable, attached hereto. In
the event of any conflict between the terms and conditions of this Agreement
and the Schedule, the Schedule will supersede and be controlling.
"Services" means Professional Services and Support Services.
"Sprint Software" means computer code, modules, programs, data files or
rules, including related documentation, owned or licensed by a third party
to Sprint and designed to be linked, combined or otherwise operated with OSI
Software to augment or enhance it. Sprint Software excludes Products.
"Statement of Work" means a description of Professional Services attached to
a Work Order which is made a part of this Agreement.
"Support Service" The update and support services described at Exhibit A
hereto.
"Term" means the mutually agreed upon period of time over which this
Agreement extends, as set forth in Article 10.
"Toolkit(s)" means the Product(s) which permits user customization or
extension of the application software and/or production of Developed
Programs.
"Training" means OSI units of professional training classes and training
services, currently offered in OSI's Training Catalog or Registration Form,
conducted by certified OSI trainers, and provided at OSI's offered locations
or Sprint's site.
"Vendor" means a third party which directly or indirectly provides software
embedded in OSI Software or Vendor Software.
"Vendor Software" means computer code, modules, programs, data files or
rules listed as Vendor Software on the Price List or provided to Sprint by
OSI as separately packaged software in connection with Services or
otherwise.
(*)
4. Grant of License
Page 2 of 20
<PAGE>
4.1 General. This Section sets forth the rights granted to Sprint for the
Products. Vendor Software may be subject to additional license
restrictions specified in licensing documents accompanying the
Products. Except for Rulesets which are provided in NetExpert(R)'s 4GL
programming language, Sprint will receive only an object code license
for Products.
(a) Right to Use. Subject to the terms of this Agreement, OSI hereby
grants Sprint a perpetual, nonexclusive, transferable (only to
Affiliates), right and license, without the right to sublicense, to
install, copy, and use OSI and Vendor Software on its Authorized
Computer and to use the Manuals and Deliverables other than OSI
Software for that purpose. Subject to the terms of this Agreement,
Sprint may also (1) modify rules and data files included in OSI
Software, and (2) modify OSI Software, link, combine or otherwise
operate OSI and Vendor Software with Sprint Software and use the
resulting Combined Software solely for Sprint's business purposes. Use
of OSI and Vendor Software on an Authorized Computer is limited to the
number of processing units, concurrent users, concurrent processes,
data volume or other license measurement criteria for which Sprint has
paid the applicable fees. OSI reserves all rights not explicitly
granted in this Agreement.
(b) The use of OSI or Vendor Software greater than the quantity of
licenses paid for by Sprint or any Affiliate is prohibited and any such
use will be subject to additional license fee(s). Sprint represents and
warrants that it will not use any of the licenses provided by OSI under
this Agreement in any manner not strictly authorized by this Agreement.
4.2 Toolkit(s). OSI hereby grants Sprint a perpetual, nonexclusive,
transferable (only to Affiliates), license to modify the Toolkit(s) in
order to create Developed Programs. To the extent a Developed Program
contains all or any portion of OSI Software or Toolkit component,
Sprint agrees that any sublicenses to the Developed Programs will
contain terms and conditions at least as restrictive as those generally
set forth in agreements which Sprint uses to protect its own property.
Such Developed Programs will be Sprint's sole responsibility and are
not covered by OSI's warranty or maintenance provisions. OSI shall
retain all right, interest in, and title to, any OSI Software or
Toolkit components contained in the Developed Programs, if any.
4.3 Third Party License. If all or any part of a Product (or any updates,
upgrades, or revisions thereto) delivered to Sprint under this
Agreement has been licensed to OSI by a third party software supplier,
excluding Vendor Software, then, notwithstanding anything to the
contrary contained in this Agreement, Sprint is granted a sublicense to
the third party software subject to terms and conditions no more
restrictive than those contained in this Agreement.
4.4 Term Limitations. The term of the license granted in Section 4 will
continue until terminated under Section 10, but Support Services will
only be provided under Exhibit A while Sprint has a fully paid current
Support Services subscription.
4.5 Intellectual Property. Products are copyrighted. Sprint will not
sublicense Products and will not copy, alter, adapt, modify or make
derivative works of Products except as expressly permitted by this
Section. Products may contain processes and techniques that are
protected by patents. No license to use these processes and techniques
apart from the Products is granted. Sprint will not acquire any right
to the trademarks or tradenames of OSI and its Vendors.
4.6 Underlying Licenses. Sprint is responsible for obtaining valid
licenses for all required third party software not supplied by OSI. A
list of such software will be appended as Attachment A to the Agreement
no later than 30 days after the effective date of this Agreement and
may be amended from time to time as necessary to keep the list
accurate. Such listed software is approved by OSI for Sprint use.
5. Scope of Use
5.1 Authorized Users. The rights granted under this Agreement extend to
Sprint's employees, authorized agents, representatives, and
subcontractors acting on behalf of Sprint in the course of Sprint's
business.
5.2 Back-up Copies. Sprint will have the right to make backup copies of
the Products to the extent reasonably necessary only and exclusively
for emergency and non-routine use of the Product by Sprint in an
emergency and non-routine situation provided that all copyright, patent
trademark and other proprietary notices on and in the Products are
simultaneously copied. Sprint may use such back up copies only to the
minimum extent necessary to maintain normal operations during the
emergency or non-routine situation and must discontinue use of the back
up copies as soon as the emergency or non-routine situation is
normalized.
5.3 Documentation Reproduction. Sprint may make, or have made on its
behalf, a reasonable number of copies of the Product documentation and
user manuals, which will be supplied to Sprint in the format and medium
designated by Sprint.
Page 3 of 20
<PAGE>
5.4 Use Restrictions. Sprint will use commercially reasonable efforts,
which shall be no less stringent than those efforts Sprint uses to
protect its own software or other similar property, to prevent the
Products from being used in any manner that would enable any other
person or entity to use the Products in violation of this Agreement.
Except as provided in the Product documentation relating to Toolkit(s),
Sprint is not authorized to modify, adapt, translate, or create
derivative works based upon, in whole or in part any Products, or to
reverse compile or disassemble the Product or otherwise attempt to
derive the source code for or operation of OSI Software and Vendor
Software, or to decode, de-encrypt or engineer around any authorization
codes, lockout software or other security measures contained in the OSI
Software. Sprint may use Toolkit(s) or Developed Program(s) only on
computers which are operating one or more Products.
5.5 Use of Products to Provide Services to Third Parties. Sprint will not
use Products to provide network management or operations support
services to any third party, whether on its own network, through its
own network elements, on the network of a third party, through the
network elements of a third party, or otherwise, without executing a
network services agreement with OSI and complying with the terms of
that agreement.
5.6 Reservation of Rights, Third Party Beneficiaries. Except as set forth
in this Agreement, OSI reserves to itself and Vendors all rights to
engage in activities which, absent a grant of rights, would give rise
to liability for infringement of intellectual or intangible property
rights. Oracle Corporation is a third party beneficiary of this
Agreement and may directly enforce its rights under this Agreement and
in its intellectual property directly against Sprint. If Oracle
Corporation cannot bring such a direct action under applicable law,
Sprint will amend this Agreement to create a direct contractual
relationship between Sprint and Oracle Corporation.
5.7. Title. This Agreement does not grant Sprint title to, or rights of
ownership in, the Products. All Products furnished by OSI, and all
copies thereof made by or on behalf of Sprint, including any
translations, compilations, and partial copies, and all patches,
revisions, and updates thereto, are and shall remain the property of
OSI or OSI's licensors, as applicable.
5.8. Proprietary Markings. Sprint agrees not to remove or destroy any
proprietary markings or proprietary legends placed on or contained
within the Products or any related materials or documentation.
Additionally, Sprint agrees to reproduce and include OSI's proprietary
and copyright notices on any copies of the Products and related
materials, or on any portion thereof, including reproduction of the
international copyright notice.
6. Relocation or Transfer
Sprint will have the right to relocate or transfer the Products, either
temporarily or permanently, to any CPU, system, and/or site, as the
case may be, with notice of such relocation or transfer to OSI, and
without any charge therefor. Sprint will need to provide notice to and
obtain the requisite authorization codes from OSI before a transfer is
affected. Sprint will not rent, license, sell or otherwise transfer any
portion of the Products.
7. Product Delivery.
7.1 Installation and Control. Except as set forth in a Statement of
Work, OSI has no responsibility for installing, testing, managing
or controlling the Products.
7.2 Acceptance. For Products on the Price List and any other Product not
provided under a Statement of Work, the Product will be accepted if it
performs materially as described in its Manual in effect at the time of
delivery. Acceptance of Deliverables will be set forth in the
applicable Statement of Work. Except as set forth in a Statement of
Work, a Product will have been accepted if (a) Sprint fails to provide
written notice within 45 days of delivery of non-acceptance to OSI
detailing one or more reproducible nonconformities in sufficient detail
for OSI to reproduce and analyze the nonconformity, or (b) if Sprint
uses the Product for commercial purposes, including but not limited to
managing its network or supporting its operations in any manner after
that 45 day period. OSI will take commercially reasonable steps to
remedy agreed nonconformities promptly after receiving notice from
Sprint, and on delivery of the conforming Product, a new 45 day
acceptance period will begin.
7.3 OSI will deliver the Products to Sprint in accordance with the delivery
terms and conditions set forth herein or as otherwise provided in the
Schedule or Order. The Products licensed to Sprint under this Agreement
will be packed and according to OSI standard practice F.O.B.
Destination, to Sprint's receiving facility designated in the Schedule
or Order. Sprint will be responsible for the payment of all freight,
customs, duties, international freight forwarding and related charges
applicable to the delivery of the Products to Sprint, provided OSI
follows
Page 4 of 20
<PAGE>
the Transportation Routing Guide attached hereto. Risk of loss
or damage to the Products shipped by OSI to Sprint will pass on
delivery to Sprint's receiving facility designated in the Schedule or
Order.
7.4 Each shipment is a separate sale obligating Sprint to pay OSI whether
the shipment fully or partially fulfills an Order. Sprint has 30 days
from receipt to verify that all Products have been received. OSI will
replace missing Products at no charge.
8. Invoicing and Compensation
8.1. Expense Reimbursement. OSI will be reimbursed, at reasonable and
actual costs, for travel, living, and other expenses incurred under VPS
or Training, and authorized by Sprint. Travel and living expenses will
not be reimbursed unless they are in conformance with Sprint's Travel
and Expense Reimbursement Policy attached hereto as Attachment B and
incorporated herein.
8.2. Taxes, Duties, and Fees. Sprint is responsible for any local, state, or
federal sales, use, or other excise taxes imposed upon the fees to be
paid by Sprint for the Products or Services provided Sprint by OSI
under this Agreement. Such tax will be separately stated on the invoice
and will be paid by Sprint in addition to the fees or other
compensation owed OSI.
8.3 Invoicing, Itemization, and Payment Procedures. All invoices must be
materially in accordance with the invoice amounts and instructions
provided herein, or as otherwise stated in the Order. OSI must maintain
and submit, as applicable, itemized time records and expense reports
with each invoice. Unless otherwise stated in the Order, undisputed
amounts due OSI will be paid by Sprint within thirty (30) days of
receipt of a proper invoice. A proper invoice is one that provides the
following information: Order Number including Corp. Code; Accounting
Information such as Cost Center, and Order Number (if applicable).
Except as set forth in an Order for particular Professional Services,
payment is due the later of 30 days after receipt of the invoice or the
Installation Date. Disputed amounts will be paid, if owed, within
thirty (30) days of resolution of the dispute. Amounts not paid when
due will accrue interest at the lesser of 1.5% per month or the highest
rate permitted by applicable law, and Sprint will reimburse OSI for all
fees, costs and expenses (including attorneys' fees and court costs)
incurred to collect such amounts. OSI agrees to invoice Sprint in
accordance with the invoice instructions contained in this Agreement or
as otherwise provided in the Order. Additionally, Sprint and OSI will
work together in good faith to timely resolve any amounts disputed in
good faith. Time is of the essence of this agreement to timely pay
undisputed amounts and to timely resolve disputed amounts.
1. If an Order is priced on a time and materials basis with a not-to-exceed
amount, OSI will use commercially reasonable efforts to complete the work
described in the Order for that amount, and OSI will provide advance notice
to Sprint if that work will not be completed for that amount. On receipt of
that notice, Sprint may determine whether to continue the work or to accept
the work in its then-current form and terminate further work under that
Order.
8.5 Partial Payment. Notwithstanding Section 7.2 of this Agreement, if
Sprint has not fully paid a properly submitted OSI invoice within 60
calendar days of the acceptance date (as defined at Section 7.2 of this
Agreement), and any portion of the software that is the subject of the
invoice is being used by Sprint in any commercial or production
environment, Sprint will pay no less than 50% of the then unpaid
balance of the invoice, plus any applicable interest, by no later than
90 calendar days after the acceptance date ("90 day payment").
9. Audits.
9.1 With at least 30 days prior written notice, OSI may inspect, during
regular business hours at Sprint's facilities, records to verify
Sprint's proper use of and payment for all Products and Services.
Sprint will keep records regarding its use of the Products in
sufficient detail to permit that verification. If, following an audit,
OSI determines that there has been an underpayment of any amounts due,
OSI will invoice Sprint for and Sprint will pay the amount of the
underpayment plus interest as provided in Section 2(d) from the date
each payment was due. If the underpayment for items under any Order was
more than five percent of the amount actually due, OSI will also
invoice Sprint for and Sprint will also pay OSI's inspection expenses.
Audits will be conducted no more frequently than once annually.
9.2 OSI will maintain all records pertaining to this Agreement for a period
of two (2) years after Sprint's final payment of all amounts due
hereunder. Sprint may audit, copy and inspect OSI's records related to
this Agreement to verify OSI's compliance with the terms of this
Agreement. All audits will be conducted at OSI's business premises
during OSI's regular business hours during the term of this Agreement
for the two years described above. Audits will be conducted no more
frequently than once annually.
10. Term And Termination
Page 5 of 20
<PAGE>
10.1 Term. This Agreement will be effective as of the Effective Date and
continue thereafter for a period three (3) calendar years following
the Effective Date (the "Term") and will automatically renew for
successive one year terms thereafter except that after expiration of
the initial three year term, either party may terminate this
Agreement upon 90 days prior written notice to the other party. The
terms of this Agreement will continue in effect for any Order that is
outstanding at the time of termination under this Agreement or
expiration of the Term.
10.2. Termination by Sprint. Sprint may terminate this Agreement, the
Order, or any license hereunder at any time, without liability
(except Sprint shall be immediately liable for payment of any
undisputed invoices and any charges for services actually performed
prior and up to the date of termination), upon 90 days' prior written
notice thereof to OSI.
10.3. Termination for Breach. Each party has the right to terminate this
Agreement if the other party commits any material breach of this
Agreement and fails to remedy such breach within thirty (30) days
after written notice of such breach. If OSI terminates any license
for a material breach of this Agreement, Sprint will immediately
destroy or return to OSI all copies of the Product then in its
possession or under its control and Sprint will have no continuing
rights to that Product, whether alone or as part of Combined
Software.
10.4. Termination Upon OSI Merger or Sale. This Agreement and the Order
may be terminated upon Sprint's reasonable request without penalty if
there is any merger, consolidation, or sale of all of the assets of
OSI, or upon any other material change in control or ownership of
OSI. OSI must give Sprint no less than thirty (30) days' written
notice of any material change in control or ownership of OSI.
10.5 OSI or Sprint may terminate by notice if the other party becomes
insolvent, bankrupt or makes an assignment for the benefit of
creditors.
10.6. Return of Sprint-Owned Property. Upon termination of this Agreement
or the Order, OSI must, within thirty (30) days, return all Sprint-
Owned Property (as such term is defined in Article 11).
10.7 Survival. On expiration of the Term or termination of this Agreement
for any reason, the obligations of Sprint to pay amounts owed to OSI
and to discharge any liability incurred before expiration or
termination will survive.
11. Ownership
11.1 Sprint-Owned Property. All equipment, materials, drawings, software,
or data of every description that OSI receives directly or indirectly
from Sprint or from a third party on behalf of Sprint, is the
property of Sprint ("Sprint-Owned"). All Sprint-Owned Property must
be marked as such by Sprint, and such marked property must be
returned to Sprint upon Sprint's request, or upon the termination or
expiration of this Agreement, whichever is earlier. Sprint-Owned
Property will only be used in OSI's performance of this Agreement.
Sprint may inspect any directly associated and non-proprietary
agreements and records, including invoices, by which OSI acquires
possession of Sprint-Owned Property.
11.2 Work-for Hire. OSI must promptly disclose and assign to Sprint all
intellectual property rights to Rulesets generated, conceived or
developed through VPS under this Agreement ("VPS Rulesets"),
including but not limited to Proprietary Information, inventions
conceived or reduced to practice in the VPS Rulesets as a result of
this Agreement and any resulting patents based strictly upon the VPS
Rulesets. Any works of authorship in any form of expression,
including but not limited to manuals and software developed, in the
form of VPS Rulesets under this Agreement, are works for hire and
belong exclusively to Sprint. If, by operation of law, the ownership
of such works for hire do not automatically vest in Sprint, then OSI
will take necessary steps to assign ownership of such works to
Sprint. OSI will provide reasonable assistance to Sprint to secure
intellectual property protection of VPS Rulesets, including but not
limited to assistance in the preparation and filing of any directly
related patent applications, copyright registrations, and the
execution of all applications, assignments or other instruments for
perfection of protection or title. OSI will pay its employees any
compensation due in connection with the assignment of any
intellectual property or invention directly related to the VPS
Rulesets. OSI warrants to Sprint that OSI's employees are subject to
agreements which will secure Sprint's rights under this section.
11.3 License to Use Prior OSI-Owned Works. OSI grants to Sprint a fully
paid-up, United States wide, non-exclusive license to utilize any
work previously owned by OSI but delivered to Sprint within VPS
Rulesets under Section 11.2 of this Agreement in any manner and in
all media now known or later conceived or created.
Page 6 of 20
<PAGE>
11.4 OSI Property. All right, title and interest to copyrights, trade
secrets, patents and other intellectual property rights (1) in the
Products will remain the exclusive property of OSI and its Vendors, as
applicable, and (2) in Sprint Software will remain the exclusive
property of Sprint. For Combined Software, the parties will each retain
full and exclusive rights to those portions of their respective
software that are incorporated into the Combined Software. Combined
Software will not be a joint work, and upon termination of the License
to any Product included in Combined Software, Sprint's right to use
that Product even as part of Combined Software will terminate.
12. Safety
12.1 OSHA. OSI and Sprint will comply with all Occupational Safety &
Health Act (OSHA) regulations and all other applicable federal, state,
and local rules and regulations that may apply to performance of the
technical support services required under this Agreement. OSI must
promptly notify Sprint by telephone (followed by written confirmation
within twenty-four (24) hours) of any product or material used in
providing technical support services that OSI is actually aware of
that fails to comply with any applicable safety rules or standards of
any government agencies (including the Environmental Protection
Agency) or that contains a defect which could present a substantial
risk to the public health or of injury to the public or the
environment.
12.2. Injury Prevention. If OSI's work under this Agreement involves
performance on Sprint's or its customers' premises, OSI must take
necessary precautions to prevent injury to persons or property during
the work and adhere to security procedures of Sprint or its customers.
12.3. Weapons Prohibition. OSI is prohibited from carrying weapons or
ammunition onto Sprint's premises or using or carrying weapons while
performing work on Sprint's behalf or attending Sprint-sponsored
activities. OSI further agrees to comply with any postings or notices
located at Sprint's premises regarding safety, security, or weapons.
13. OSI Warranties
OSI warrants to Sprint the following:
13.1. Services Warranty. Each OSI employee, subcontractor, or agent
assigned by OSI to render Support Service, Training, or VPS under
this Agreement has the proper expertise, skills, training, and
professional education to perform the services required under this
Agreement in a professional manner and consistent with applicable
industry standards.
13.2. Product Warranty. For twelve (12) months from the date of NetExpert
Framework Product delivery, for 90 days after a delivery of OSI
Software not provided under a Statement of Work and, for OSI Software
provided under a Statement of Work, 90 days after acceptance as
defined in the Statement of Work, the Products will materially
conform to the description, definition, specification, and functional
requirements set forth in the Statement of Work or OSI's user
documentation provided to Sprint with the Products delivered
hereunder. OSI will, at its own expense, and in material conformance
with OSI's technical support requirements contained in this Agreement
and the Order, promptly correct all such material nonconformities in
the Products reported by Sprint during the applicable warranty period
set forth herein, even if the period to perform those corrections
extends beyond the applicable warranty period.
13.3. Media Warranty. All tapes, diskettes, or other media delivered to
Sprint by OSI under this Agreement will be free of defects in
materials and workmanship under normal use for a period of ninety
(90) days following OSI's delivery of same. During the ninety (90)
day period, Sprint may return the defective media to OSI, and it will
be promptly replaced by OSI without charge to Sprint.
13.4. Virus Warranty. The Products delivered to Sprint under this
Agreement will be free from any viruses at the time the Products are
delivered to Sprint, and will be free from disabling programming
codes, instructions, or other such items that may interfere with or
adversely affect Sprint's permitted use of the Product. Products may
contain authorization codes, to restrict their operation to properly
licensed uses.
13.5. Non-Infringement Warranty. OSI has the full power and authority to
grant the license granted Sprint under this Agreement with respect to
the Products, and neither the license to nor use by Sprint of the
Products, as permitted under this Agreement, will in any way
constitute an infringement or other violation of any copyright,
patent, trade secret, trademark, nondisclosure, or any other
intellectual property right of any third party. The Products licensed
under this Agreement will be free and clear of all liens and
encumbrances.
Page 7 of 20
<PAGE>
13.6. OSI Personnel Warranty. To the best of OSI's knowledge, after
investigation, neither OSI nor its personnel performing services
under this Agreement has any existing obligation that would violate
or infringe upon the rights of third parties, including property,
contractual, employment, trademark, trade secrets, copyright, patent,
proprietary information and non-disclosure rights, that might affect
OSI's ability to fulfill its obligations under this Agreement.
13.7. Warranty Term. Any warranty term specified in this Agreement will
commence upon delivery of the Products and will continue
uninterrupted thereafter for the duration of the term specified.
13.8. Year 2000 Warranty. Through December 31, 2001 OSI warrants that the
occurrence in, or use by, the Product (and any hardware or firmware
product(s) delivered by OSI to Sprint) of dates after January 1, 2000
A.D., including dates and leap years between the twentieth and
twenty-first centuries ("Millennial Dates"), will not adversely
affect the Product's performance. The Product (and any hardware or
firmware product(s) delivered by OSI to Sprint) will without error or
omission, create, receive, store, process and output (collectively,
"Compute") information related to Millennial Dates. This warranty
includes, without limitation, that the Product will accurately, and
without performance degradation, Compute Millennial Dates, date-
dependent data, date-related interfaces, or other date-related
functions (including, without limitation, calculating, comparing, and
sequencing such functions.) OSI Software will include Year 2000
capabilities such that in the normal operation of OSI Software: (1)
values for current dates before, during and after the Year 2000 will
not cause interruptions in normal operation, except that because of
UNIX limitations, current dates greater than or equal to 2038 cannot
be supported on 32 bit machines, or 64 bit machines using 32 bit
dates, (2) manipulations of date-related data will produce desired
results before, during and after the year 2000 and management of
stored dates greater than or equal to 2038 will not cause problems on
32 bit machines, (3) date elements in interfaces and data storage
will permit specification of century to eliminate date ambiguity, (4)
for any date element represented without century, two digit years
greater than or equal to 69 will convert to 19xx and two digit years
less than 69 will convert to 20xx, and (5) leap years will be
properly processed and recognized. No warranty is provided for any
date related problems caused by Vendor Software, or by any other
software or any hardware connected to OSI Software. At Sprint's
request, OSI will provide written evidence sufficient to demonstrate
adequate testing and conversion of the Product to meet the foregoing
requirements.
13.9 Modifications and Vendor Software. OSI makes no warranty as to any
portion of OSI Software that is modified, altered or combined with
any other software, such as Rulesets, by any party other than OSI or
OSI's authorized agents, and as to any of the related Manual
provisions, or as to any of the Vendor Software and related Manuals.
On request, OSI will transfer to Sprint any assignable warranties
that OSI receives from Vendors for Vendor Software. OSI will
cooperate with Sprint to obtain warranty service for Vendor Software
for which OSI has retained warranty ownership.
13.10 Pre-Release OSI Software. Pre-Release OSI Software (such as "alpha"
or "beta" versions of new or existing OSI Software) may be provided
in OSI's discretion to Sprint solely as an accommodation for its
evaluation, comment and familiarization. Pre-Release OSI Software is
provided without warranty of any nature. In particular, Pre-Release
OSI Software may contain bugs and inoperable features that may not be
corrected by OSI, and OSI may change Pre-Release OSI Software
significantly prior to commercial release, or even not produce a
commercial product based on Pre-Release OSI Software.
13.11 Warranty Limitations. SECTION 13 CONTAINS THE EXCLUSIVE WARRANTIES
FOR PRODUCTS AND SERVICES. EXCEPT FOR THOSE WARRANTIES, PRODUCTS AND
SERVICES ARE PROVIDED "AS-IS." NO OTHER WARRANTY, ORAL OR WRITTEN, IS
EXPRESSED OR IMPLIED. OSI DOES NOT WARRANT THAT (1) ANY PRODUCT OR
SERVICE WILL MEET SPRINT'S REQUIREMENTS, (2) THE PRODUCTS WILL
PERFORM IN EVERY OPERATING ENVIRONMENT, (3) THE OPERATION OF THE
PRODUCTS WILL BE UNINTERRUPTED OR ERROR FREE, OR (4) ANY DEFECT OR
MALFUNCTION IN THE PRODUCTS OR SERVICES IS CORRECTABLE OR WILL BE
CORRECTED. OSI SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. The warranties
provided in this Section 13 will not apply to, and OSI will have no
warranty obligation with respect to, any defect or malfunction (1)
resulting from (A) improper modification or use by Sprint, (B)
hardware, software, interfacing or supplies other than those provided
by OSI in the form provided by OSI, or (C) any cause other than
ordinary or authorized use or (2) for which OSI (A) is unable to
reproduce the nonconformity, (B) is not provided with a description
of the parameters, procedures or conditions which generate the
problem in sufficient detail to permit isolating the code which
causes the problem or (C) is not provided with all data files, rules,
Sprint Software and system access required to reproduce and analyze
the problem.
Page 8 of 20
<PAGE>
13.12 Exclusive Remedies. Sprint's sole remedy for a breach of the limited
warranty in Section 13.2 will be for OSI to use commercially
reasonable efforts to restore the Products to materially conforming
condition under the terms of Exhibit A, or if OSI is unable after
such efforts to so restore the Products, then for Sprint to obtain a
full refund upon return of those Products to OSI.
13.13 Non-Standard Uses. Products are designed for standard commercial
applications such as communications networks and are not intended for
planning, construction, maintenance or direct operation of critical
systems or facilities, such as aircraft control systems and nuclear
or hazardous waste facilities. Sprint will not use Products for non-
standard applications without OSI's prior consent, which will require
additional contractual safeguards. If Sprint uses Products in a non-
standard application, it will be solely liable for the use and will
indemnify and hold OSI harmless from all loss, damage, expense or
liability in connection with that use.
13.14 Time to Bring Claim. No action will be brought against either party
more than 2 years after the cause of action first arises.
14. Period of Assured Availability. Training, Support Service and VPS described
in this Agreement and the Schedule hereto, will be available as follows:
14.1 Training: for the current major release only (training on prior
releases is available on a customized basis.)
(*)
14.3 VPS: this is available on a case-by-case time and materials basis at
any time.
14.4 Product Releases:
(a) A "major release" means the release of an OSI product where, if
the product version number is designated by w.x.y.z. the digit
represented by "w" or by the "x" is changed to one or more digits
higher;
(b) A "maintenance release" means the release of an OSI product where,
if the product version number is designated by w.x.y.z. the digit
represented by "y" or by the "z" is changed to one or more digits
higher.
15. Default
In the event of any breach of this Agreement or the Schedule, or Order
hereto, by either party, the other party agrees to give the breaching party
written notice identifying such breach with specificity. The breaching party
will then have thirty (30) days to cure the breach. Failure to substantially
cure any such breach will constitute a default hereunder. No default under
this Agreement or the Schedule, or Order hereto, will constitute a default
under any other agreement, license, or schedule between the parties.
16. Remedies
The rights and remedies of the parties as set forth in this Agreement are in
addition to any other rights and remedies available to the parties in law or
in equity. Unless otherwise expressly provided herein or in the Schedule, or
Order hereto, all remedies available to either party are cumulative and may
be exercised concurrently or separately. The exercise of any one remedy will
not be deemed an election of such remedy to the exclusion of other remedies.
If either party is required to seek enforcement of any provision of this
Agreement, the prevailing party in any legal action or proceeding will be
entitled to recover its reasonable attorney's fees and litigation costs and
expenses in addition to any other relief offered.
17. Liability And Indemnification
17.1 (a) This indemnity section 17.1 applies only to OSI's provision of
professional services to Sprint and not to any OSI software or other
OSI Products, including but not limited to, the mechanical, electronic
or digital operation of any OSI Software or other OSI Products,
whatsoever.
(c) Sprint shall promptly notify OSI of any claim or suit asserted
against Sprint under this Section 17.1 and provide all information and
assistance reasonably requested by OSI in connection with the claim or
suit. Sprint shall permit OSI, at OSI's expense, to assume sole
authority to conduct the trial or settlement of the claim or suit and
any negotiations related to it. Sprint agrees that it will not
unilaterally settle any claim for which OSI may be liable under this
Section 17.1, or otherwise, without prior written consent of the
General Counsel or managing attorney of OSI unless Sprint releases OSI
from OSI's obligations to Sprint under this Section 17.1 with regard
to the entire claim unilaterally settled by Sprint.
17.2 Infringement Indemnification
(*)
Page 9 of 20
<PAGE>
17.2.1 Indemnification by OSI.
(a) So long as Sprint complies with the terms of Sections 4
and 5 of this Agreement, OSI will defend Sprint against
any claims, and indemnify and hold Sprint harmless
against any judgments, directly or indirectly resulting
from a claimed infringement or violation of any
copyright, patent, trademark or misappropriation of trade
secret, or other intellectual property right with respect
to OSI Software. OSI will have no liability for any such
claims or judgments based on (i) the actions of Sprint,
its employees or agents, (ii) use of a version,
modification or adaptation of OSI Software, if the
infringement would have been avoided by the use of a the
current unaltered release of OSI Software, (iii) use of
Combined Software, if OSI Software operated independent
of the Combined Software is not the cause of the
infringement, or (iv) use of OSI Software in combination
with any computer software, hardware or data not
delivered in that combination by OSI.
(b) On receiving notice of a claimed infringement, OSI may
(a) settle on terms that permit continued use of OSI
Software, (b) discontinue distribution of the OSI
Software that is the cause of the claim and provide a
reasonable substitute for that OSI Software, (c) modify
OSI Software to be non-infringing, or (d) if the
foregoing remedies are not reasonably available, grant
Sprint a credit for the depreciated value of the relevant
portion of OSI Software (based on a 60 month life
beginning on the date of delivery to Sprint) and accept
its return.
(c) This Section provides Sprint's sole and exclusive remedy
against OSI for infringement of patents, copyrights or
other intellectual property rights.
17.2.2 Indemnification by Sprint. Sprint will defend OSI and its
Vendors against any claims, and indemnify and hold OSI and its
Vendors harmless against any judgments, directly or indirectly
resulting from any claimed infringement or violation of any
copyright, patent or other intellectual property right with
respect to Products to the extent that Sprint Software or any
of the acts described in Section 17.2.1 (i) through (iv) is
the cause of the claimed infringement or violation.
17.2.3 Cooperation. Notwithstanding the above, an indemnifying party
is under no obligation to defend or indemnify another party
unless: (1) the indemnifying party has been promptly notified
of the claim or suit and furnished with a copy of each
pleading, communication, notice and other action relating to
the claim or suit; (2) the indemnified party permits the
indemnifying party, at the indemnifying party's expense, to
assume sole authority to conduct the trial or settlement of
the claim or suit and any negotiations related to it; and (3)
the indemnified party promptly provides all information and
assistance reasonably requested by the indemnifying party in
connection with the claim or suit.
17.3. Election of Remedy. If Sprint's license to or use of the Product, or
Support Service or Training, or VPS, as permitted under this
Agreement, is enjoined, OSI must, at OSI's expense, perform the
following in the order presented:
a) procure for Sprint and its customers the continued right to use
the Product, or Support Service, or Training, or VPS, as permitted
herein; or
b) replace the Product, or Support Service, or Training, or VPS with
equivalent non-infringing Product, or Support Service, or
Training, or VPS; or
c) modify the Product, or Support Service, or Training, or VPS so
they become non-infringing; or
d) remove the Product or discontinue Support Service, or Training, or
VPS and grant Sprint a refund or credit at Sprint's option for the
depreciated value of the relevant portion of OSI Software (*) and
accept its return.
17.4. No Special Damages. Except for the indemnity provisions of this
Agreement neither party will be liable to the other for lost data,
revenue profits, savings, or for special, indirect, or consequential
loss or damage, whether or not such loss or damage is caused by the
fault or negligence of that party, its employees, agents, or
subcontractors.
17.5. Survival of Indemnity. The indemnity obligations under this Article
17 will survive any expiration or termination of this Agreement or the
Schedule, or Order hereunder.
18. Liability Limitation
NEITHER PARTY WILL BE LIABLE FOR DAMAGES IN EXCESS OF THE AMOUNTS PAID FOR
THE PRODUCTS OR SERVICES THAT ARE THE SUBJECT OF THE CLAIM. (*) THIS
LIMITATION WILL (1) APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER CONTRACT
OR TORT, INCLUDING NEGLIGENCE AND STRICT LIABILITY, AND (2) NOT APPLY TO
INDEMNITY UNDER SECTION 17 OR TO LIABILITY FOR REAL
Page 10 of 20
<PAGE>
PROPERTY DAMAGE, DEATH OR BODILY INJURY CAUSED BY THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SPRINT OR OSI OR OSI'S VENDORS.
19. Future Assurances
In conjunction with a distribution of the source code escrow described in
Article 20, OSI hereby grants to Sprint a personal, non-exclusive, non-
transferable and conditional license to use, modify, and enhance the
released source code of the software licensed by Sprint only as absolutely
necessary to continue the benefits afforded to Sprint under this Agreement
and only under the restrictions set forth in Article 20, and OSI agrees that
the rights and licenses granted to Sprint herein: (i) are fully performed,
(ii) are not of an executory nature, (iii) will not be subject to rejection
under Title 11, Section 365 (a) of the United States Code, or any
replacement provision therefor, and (iv) will be deemed to be, for purposes
of Title 11, Section 365(n) of the United States Code, or any replacement
provision therefor, licenses to rights to use "intellectual property" as
defined therein.
20. Source Code Escrow
20.1. Deposit of Product.
Within thirty (30) days of OSI's receipt of Sprint's payment for each
item of OSI Software encompassed by this Agreement, OSI will, at OSI's
sole expense, deposit the source code for each item of OSI Software
for which OSI is in receipt of payment ("deposit materials") with the
independent escrow agent Data Securities International, Inc. ("DSI")
pursuant to a written escrow agreement signed by Sprint and OSI and
consistent with the terms of this Agreement ("escrow agreement").
Additionally, so long as Sprint is in substantial compliance with the
terms of this Agreement, OSI will deposit the source code of any
updates, upgrades, or other revisions of the deposit materials
(collectively "update" or "updates") for which Sprint then has a
current and fully paid up subscription for maintenance and support
services within 60 calendar days of the release of the update. OSI has
complete and sole discretion regarding if and when it releases any
updates. OSI shall deposit the updates with the escrow agent pursuant
to the escrow agreement.
20.1.1 The escrow agent will give Sprint and OSI written notice of
any deposit by OSI and any failure by OSI to pay any escrow
fees and expenses. At Sprint's request and expense, the escrow
agent will also certify that the deposit meets the technical
requirements set forth in the escrow agreement, including
tests of the deposited Product. The source code delivered to
the escrow agent will be in a form suitable for reproduction
by Sprint. Each source code deposit will comprise: (i) the
full source code language statement, (ii) all third-party
software used in support and maintenance or enhancement of the
deposited Product, (iii) the complete Product, maintenance,
and support documentation, and(iv) all other materials
necessary to maintain, modify, or enhance the deposited
Software Product without the assistance of OSI or the
reference to any other material.
20.2. Release of Deposit.
The escrow agreement described in this Article 20 will provide that on
the happening of any of the following events, Sprint will give written
notice to OSI and the escrow agent, specifying the event. Unless
within 7 working days of OSI's receipt of the notice OSI files with
the escrow agent its affidavit executed by a responsible executive
officer stating that no such event has occurred or that the event has
been cured, then OSI or the escrow agent will thereupon promptly
deliver to Sprint the portions of the deposit materials and updates
that Sprint certifies in writing to the escrow agent are critical to
Sprint's continued use of the OSI Software encompassed by this
Agreement.
a) OSI is unable or unwilling to materially correct, within 30
calendar days of OSI notice thereof, any defect which prevents the
Product from functioning in accordance with OSI's specifications.
b) OSI materially breaches the Support Services Agreement attached to
this Agreement and the breach is not cured within 30 calendar days
of OSI's receipt of written notice from Sprint specifying the
breach with particularity.
c) OSI materially breaches any obligation it has under this Agreement
to pay the escrow fees or expenses required under the source code
escrow agreement between the parties.
d) Any sale, assignment, or other transfer of OSI's rights to the OSI
software encompassed by the deposit material and the updates,
without the prior written consent of Sprint, which consent will
not unreasonably be withheld, if such transfer would prevent OSI
from discharging its obligations under this Agreement.
e) OSI makes a general assignment for the benefit of creditors, or
becomes the subject of a voluntary or involuntary petition in
bankruptcy and the bankruptcy proceeding is not dismissed or
discharged within 90 calendar days of the filing of the bankruptcy
action, or if a receiver, trustee, or custodian is appointed for
Page 11 of 20
<PAGE>
OSI's business and such appointment is not vacated, dissolved or
terminated within 90 calendar days of the appointment, or if OSI
has wound up or liquidated its business.
20.3 Restrictions. The parties agree and confirm that during any period of
time in which the deposit materials or the upgrades, and each of them
(collectively "the released materials"), is in the possession of
Sprint, the released materials shall (a) be used only by Sprint
according to the terms of this Agreement , (b) not be duplicated and
sold or licensed to any third party or marketed in any manner (c) not
be transmitted, assigned or transferred to any third party in any
manner and any such transmittal, assignment or transferal shall be
void.
20.4 Return of Deposit Materials and Updates. The parties agree and
confirm that Sprint will use any deposit materials and updates
released under this Agreement only for the minimum period of time
necessary to obtain the benefits afforded Sprint under this Agreement
and that as soon as Sprint's possession of any item of the deposit
materials and updates is no longer necessary for that purpose, Sprint
will return that item, in full, to the escrow agent. For any release
of the deposit materials and updates based upon any breach of any OSI
obligation under this Agreement, the parties agree and confirm that
OSI shall have the right to cure the breach specified in the notice
required at Section 20.2 above and that Sprint shall return any such
deposit materials and updates to the escrow agent promptly upon OSI's
cure of such breach.
20.5 Ownership. The parties agree and confirm that the ownership of the
deposit materials and updates at all times belongs solely to OSI and
that any release to Sprint of the materials and updates is only made
as an accommodation to Sprint and shall not be deemed to vest in
Sprint any ownership of, or ownership interest in, the deposit
materials and updates, whatsoever.
21. Employment Practices
21.1. Compliance with Laws. OSI and Sprint must comply with laws,
regulations, and orders relating to equal employment opportunity,
workers' compensation, unemployment compensation, and FICA.
21.2. Independent Contractors. OSI, its subcontractors, employees, or
agents are independent contractors for all purposes and at all times.
OSI has the responsibility for, and control over, the means and
details of performing the technical support services, subject to
Sprint's inspection. OSI will provide all training, hiring,
supervising, hours of work, work policies and procedures, work rules,
compensation, payment for expenses, and discipline and termination of
its employees.
21.3. Sprint and OSI Agents. Neither Party will incur any responsibility or
obligation to employees, agents, subcontractors, or other parties
utilized by the other party to perform the obligations set forth in
this Agreement. Such person or parties will, at all times, remain
employees, agents, or subcontractors (whichever is applicable) of the
party using them.
21.4. Payment of Wages. Each party is solely responsible for payment of
wages, salaries, fringe benefits and other compensation of, or
claimed by, its ' employees including, without limitation,
contributions to any employee benefit, medical, or savings plan, and
is responsible for all payroll taxes including, without limitation,
the withholding and payment of all federal, state, and local income
taxes, FICA, unemployment taxes, and all other payroll taxes. Each
party is also solely responsible for compliance with applicable
Workers' Compensation laws with respect to maintenance of workers'
compensation coverage on its ' employees. Each party will indemnify
and defend the other from all claims by any person, government, or
agency relating to payment of taxes and benefits, including without
limitation, any penalties and interest which may be assessed against
Sprint. Each party will similarly indemnify and defend the other
party from all claims by any person or governmental agency which
arise directly or indirectly from any failure by the party to comply
with applicable Workers' Compensation laws with respect to
maintenance of Workers' Compensation coverage on its ' employees.
21.5. Removal of OSI Employees or Agents. If Sprint determines that a OSI-
provided employee, agent, or subcontractor is not providing
satisfactory service, Sprint will advise OSI in writing of such
concern and may recommend, with a detailed explanation in writing, to
OSI to remove that individual or subcontractor. Sprint will only pay
for work actually performed by the removed individual or
subcontractor prior to OSI's receipt of Sprint's notice for removal,
and not for transportation or per diem costs associated with
replacing the individual. OSI will submit additional resumes to
Sprint for purposes of soliciting Sprint's recommendations for
filling a vacancy at no additional charge to Sprint. If Sprint has
not replied in writing within 5 work days of the submission of the
resumes, Sprint will be deemed to have waived its right to comment on
the resumes and have any role in the decision on the replacement.
Page 12 of 20
<PAGE>
21.6. Compliance With Agreement. OSI will require its employees, agents,
and subcontractors to comply with the terms and conditions of this
Agreement. Sprint will require its Affiliates, employees, agents, and
subcontractors to comply with the terms and conditions of this
Agreement.
22. Proprietary Information
22.1. General. OSI acknowledges that while performing its obligations under
this Agreement it may have access to trade secrets owned by Sprint
including, but not limited to, Sprint products, planned products,
service or planned service, vendors, customers, prospective
customers, data, financial information, computer software, processes,
methods, inventions, marketing promotions, discoveries, current or
planned activities, research, development, or other information
relating to Sprint's business activities or operations or those of
its customers or vendors. Sprint acknowledges that it may have access
to OSI information which includes all nonpublic aspects of the
Products and Vendor Software, including programs, methods of
processing, program design and structure, the interaction and unique
programming techniques employed, their screen formats and performance
data and test results. It also includes the nonpublic plans of OSI
and Vendors for new products and services, product improvements and
marketing strategies (collectively the "Proprietary Information").
22.2. Proprietary Rights. All aspects of OSI Products and Vendor Software,
and all of the Proprietary Information (1) remain the exclusive
property of OSI or its Vendors, or Sprint, as identified above (2)
may not be used except as permitted by this Agreement, and (3) may
not be disclosed or otherwise communicated by either party, directly
or indirectly, to anyone except as permitted by this Agreement.
22.3. Confidentiality. This Agreement creates a confidential relationship
between Sprint and OSI. Each party will keep Proprietary Information
confidential and, except as authorized in writing, may only use
Proprietary Information to perform the obligations required under
this Agreement, may only make copies as necessary for performing its
obligations under this Agreement, and not disclose the Proprietary
Information except to those employees, agents and advisors who (1)
have a need to know the same, and (2) are bound by law or have agreed
in writing to maintain the Information in confidence. Upon cessation
of work, or upon termination or expiration of this Agreement, or
earlier upon request, each party will return all documents and other
materials in its control that contain or relate to Proprietary
Information to the other party. If a party discovers Information has
been improperly used, disseminated or published, it will immediately
notify the other party and take all reasonable actions to minimize
the impact of the disclosure.
22.4 Excluded Information. Even if marked as confidential, the obligations
in Section 22.1 will not apply to Information generally available to
or known to the public, known by the receiving party without
obligation of confidentiality before the negotiations leading to this
Agreement, independently developed by the receiving party outside the
scope of this Agreement, lawfully disclosed to the receiving party
without restriction by a third party having the right to make the
disclosure or required to be publicly disclosed to a tribunal. In the
case of required disclosures to tribunals, the receiving party will
promptly notify the other party of the proceeding and fully assist
the disclosing party to obtain protective orders maintaining the
confidentiality of the Information.
22.5. Non-Disclosure Agreements. As of the Effective Date, OSI has entered
into signed non-disclosure agreements with its employees, agents, or
subcontractors on terms and conditions as least as restrictive as
those contained in this Article 22.
22.6. Injunctive Relief. OSI and Sprint acknowledge that disclosure of
Proprietary Information will cause irreparable injury that is
inadequately compensable in monetary damages. Accordingly, Sprint or
OSI may seek and will be entitled to injunctive relief in any court
of competent jurisdiction for the breach or threatened breach of this
Article 22, in addition to any other remedies available in law or
equity.
23. Nondisclosure
Any restrictions prohibiting disclosure of Product or related documentation
to third parties will not prohibit Sprint from disclosing such to its
agents, representatives, and subcontractors in the course of its business
under written terms and conditions no less restrictive than those contained
in this Agreement.
24. Support Subcontracts
OSI will remain fully liable for the work performed by, and for the acts
and omissions of, OSI's authorized subcontractors that work under the
supervision and control of OSI.
Page 13 of 20
<PAGE>
25. Federal Requirements
25.1. Federal Acquisition Requirements. If Sprint or the federal government
determines that this Agreement supports specific requirements
included in a Sprint contract or subcontract with the federal
government, OSI, by its acceptance and if applicable, will comply
with certain federal procurement regulations contained in Sprint's
contract or subcontract. OSI will be subject only to federal
procurement regulations that must be included in all subcontracts as
a matter of law.
25.2. Subcontracting Opportunities. If required by a federal government
contract and applicable to the product and services provided by OSI,
OSI will agree to an accounting of dollars that are subcontracted to
firms that are Small Businesses under Small Disadvantaged Businesses,
or Women-Owned Businesses under Small Business Administration
regulations for that particular procurement. Sprint agrees to notify
OSI in advance of any such requirement and its intent to use our
products in support of a U.S. federal government contract or
procurement. These dollars will be reported in writing to the
following address:
Small Business Coordinator
Sprint
903 E. 104th Street
Kansas City, MO 64131
25.3. U.S. Government End Users ("Government"). The Product and its related
documentation are provided with "Restricted Rights". Use, duplication
or disclosure by the Government is subject to restrictions as set
forth in subparagraph (C)(1)(ii) of The Rights in Technical Data and
Computer Software clause at 252.227-7013 of the DOD FAR Supplement,
or FAR clause 52.227-19 entitled Commercial Computer Software-
Restricted Rights, as applicable. Unpublished-All Rights Reserved
Under the Copyright Laws of the United States.
Manufacturer/Contractor is OSI, Address, City, State Zip.
26. Insurance
OSI will obtain and maintain, during the term of this Agreement, with
financially reputable insurers that are licensed to do business in all
jurisdictions where work is performed and that are reasonably acceptable to
Sprint, not less than the insurance described below:
26.1. Workers' Compensation. Workers' Compensation as required under any
Workers' Compensation or similar law in the jurisdiction where work
is performed, with an Employer's Liability limit of not less than
$500,000 per accident.
26.2. Commercial General Liability. Commercial General Liability, including
coverage for Contractual Liability and Products/Completed Operations
Liability, with a limit of not less than $1,000,000 combined single
limit per occurrence for bodily injury, personal injury, and property
damage liability, naming Sprint as an additional insured.
26.3. Business Auto Insurance. Business Auto Insurance covering the
ownership, maintenance, or use of any owned, non-owned, or hired
automobile with a limit of not less than $1,000,000 combined single
limit per accident for bodily injury and property damage liability,
naming Sprint as an additional insured.
26.4. Property Insurance. "All Risk" Property Insurance covering not less
than the full replacement cost of OSI's and subcontractor's, if any,
personal property while on a Sprint work location.
26.5. Certificates of Insurance. OSI must, as a material condition of this
Agreement, and prior to commencement of any work and to any renewal
of insurance, deliver to Sprint a certificate of insurance,
satisfactory in form and content to Sprint, evidencing that the above
insurance is in force and will not be canceled or materially altered
without giving Sprint thirty (30) days' prior written notice thereof.
26.6. No Limit of Liability. Nothing contained in this Article 26 limits
OSI's liability to Sprint to the limits of insurance certified or
carried.
27. Notices
Communications relating to this Agreement, except for delivery or invoicing
instructions set forth in the Order, must be identified by the contract
number and schedule number, if applicable, and communicated by certified
mail, return receipt requested, telex, facsimile, e-mail or overnight mail
to the addresses set forth below, or such other addresses as
Page 14 of 20
<PAGE>
may be later designated by written notice of the parties. The communication
is effective on the date received unless otherwise stated in the
communication.
Sprint: OSI:
Procurement Operations
Director
903 E. 104th Street
Kansas City, MO 64131
MOKCMW0609
(816) 854-7358
(816) 854-7018
28. Arbitration
28.1. Arbitration. Except for Sections 13.5 and 17.2 hereof, any dispute
arising out of or relating to this Agreement, including any issues
relating to arbitrability or the scope of this arbitrability clause,
will be finally settled by an arbitration panel of three arbitrators
in accordance with the rules of the American Arbitration Association
applying the substantive law of Kansas without regard to any conflict
of laws provision. Each party will pick one arbitrator and the two
arbitrators thus appointed shall jointly select a third arbitrator
that is substantially familiar with the telecommunications and
software industries. The arbitration will be governed by the United
States Arbitration Act, 9 U.S.C. Section 1, et seq., and judgment
upon the award rendered by the arbitrators may be entered by any
court of competent jurisdiction. The arbitration will be held in the
Kansas City metropolitan area and the decision of the arbitrator(s)
will be in writing, stating with specificity their decision and the
explanation therefore. The arbitrators are not empowered to award
damages in excess of compensatory damages, and each party waives any
damages in excess of compensatory damages.
28.2. Exception. Notwithstanding the foregoing, either OSI or Sprint may
bring a claim for injunctive relief as provided in Section 22.5 in
any court of competent jurisdiction without first submitting the
claim to arbitration.
28.3. Continuing Performance. The parties agree to continue performance
during the pendency of any dispute, unless the Agreement is
terminated.
28.4. Limitation of Claims. Claims made by OSI may only be brought against
the Affiliate that issued the Order giving rise to the claim. No
claim may be brought against OSI more than two years after cause of
action first arises.
29. Support Service
29.1 Services. Exhibit A contains the terms upon which OSI will provide
Support Services at rates set forth in the Schedule. Professional
Services will be provided by OSI to Sprint under Orders containing
Statements of Work entered into by the parties under and made part of
this Agreement.
29.2 Training. Except as set forth in an Order or other Exhibit to this
Agreement, OSI and Vendor training will be at fees set forth in the
Schedule and subject to the provider's cancellation policies also set
forth in the Schedule.
29.3 Modifications and Cancellation.
a) Professional Services to be provided under a Statement of Work
may be canceled on 30 days' notice by Sprint, but Sprint will
pay for all accepted Professional Services provided by OSI
through the date of cancellation at rates set forth in the
Schedule (not to exceed the total amount due under that
Statement of Work) and all reasonable expenses associated with
returning OSI employees from terminated work.
b) Professional Services can be modified by written notice from
Sprint. OSI will notify Sprint of any increase in costs, delay
in schedule or other consequence from that request, and the
change will be implemented if the parties agree to a
modification to the terms of the Statement of Work.
29.4 (*)
29.5. Corrective Action. OSI will immediately notify Sprint through OSI's
WebTAC website at http://tac.osi.com/ of any high priority problems
-------------------
with the Software Product and resultant corrective action. Any such
upgrade, enhancement, new release, fix, or other improvement,
correction, or modification of the Software Product will
Page 15 of 20
<PAGE>
be marked accordingly and promptly delivered to the Sprint shipping
address set forth in the applicable Order(s).
29.6. Additional Service Fees. VPS provided by OSI for which there are
additional charges must be pre-authorized in writing by Sprint.
30. General
30.1. Timely Performance. Time is of the essence in OSI's performance
hereunder. Sprint is not obligated to pay for Support Service, VPS
or Training performed, or Products delivered, which do not
materially conform to this Agreement or the applicable Order or
Schedule hereto except for payment due to OSI under quantum meruit
principals
30.2. Materials Lien. OSI will hold Sprint harmless from all losses,
expenses, and liabilities connected with OSI's failure to promptly
pay for services, materials, equipment, or labor and will keep
Sprint premises free of claims or liens.
30.3. Governing Law. This Agreement is governed by and construed in
accordance with the laws of the State of Kansas without regard to
any conflict of laws provision.
30.4. Jurisdiction. Except as provided in the Arbitration Section, OSI and
Sprint agree that the courts of the State of Kansas will have
exclusive jurisdiction and venue over any suit, claim, or proceeding
commenced against Sprint by OSI ' regardless of the form of such
action, whether in contract, warranty, or tort. OSI and its
employees hereby consent to the jurisdiction of the courts of the
State of Kansas over the subject matter and parties, and hereby
waive its and their rights, if any, to invoke the jurisdiction or
venue of any other court, for any such suit, claim, or proceeding.
30.5. Laws and Regulations. OSI and Sprint will comply with all local,
municipal, state, federal, and governmental laws, orders, codes, and
regulations in the performance of this Agreement. Neither party will
be bound by any provision of this Agreement to the extent, but only
to the extent, that it violates applicable law.
30.6. Permits and Licenses. OSI will obtain and keep current, at OSI's
expense, all governmental permits, certificates, and licenses
(including professional licenses, if applicable) necessary for OSI
to perform its obligations under this Agreement.
30.7. Waiver. The waiver of a breach of any term or condition of this
Agreement by either party will not constitute the waiver of any
other breach of the same or any other term by either party.
30.8. Severability. If any provision of this Agreement is held to be
unenforceable, the remaining provisions will remain in effect, to be
construed as if the unenforceable provision was originally deleted.
30.9. Survival. Articles 4, 5, 6, and 11, Sections 13.5 and 13.8, and
Articles 17, 18, 19, 20, 22, 23, 28, and 31, hereof will survive the
termination or expiration of this Agreement in addition to any other
provisions that, by their content, are intended to survive the
performance, termination, or cancellation of this Agreement.
30.10. Publicity. OSI will not, without Sprint's prior written consent:
a) make any news release, public announcement, or denial or
confirmation of this Agreement or its subject matter; or
b) in any manner advertise or publish the fact of this Agreement
30.11. Ethics Code. OSI and Sprint agree to comply with Sprint's Principles
of Business Conduct, where applicable, a copy of which is attached
to this Agreement as Attachment C, and is incorporated in this
Agreement by this reference.
30.12 Equitable Relief. Any breach of a party's obligations with respect
to intellectual property rights will cause irreparable injury for
which there are no adequate remedies at law. The aggrieved party
will be entitled to equitable relief in addition to all other
remedies that may be available, without the posting of bond or other
security, or if required, then the minimum bond or security so
required.
Page 16 of 20
<PAGE>
30.13 Neither party will be liable or held in default for a failure or
delay in performing its obligations under this Agreement, other than
to make payment for amounts owing or to comply with Sections 5 and 7,
due to governmental action, statute, ordinance or regulation, fire,
acts of God, windstorm that makes performance impossible or
impractical.
30.14 Modifications to Exhibits. OSI may change the Exhibits to this
Agreement by notice to Sprint at least 30 days in advance. If a
change to Exhibit A materially reduces Support Services during a
period for which Sprint has already paid fees for those Support
Services, Sprint may terminate those Support Services for the
remainder of the period and receive a pro rata refund.
30.15 Execution. This Agreement may be executed in multiple counterparts,
each of which will be deemed an original and all of which will
constitute together one agreement. A counterpart delivered to a party
by facsimile or similar electronic means will be deemed an original,
equivalent in all respects to a manually executed counterpart.
30.16 Intentional Risk Allocation. The provisions of this Agreement reflect
an informed, voluntary allocation between the parties of the risks
(known and unknown) that may exist in connection with this Agreement.
This voluntary allocation was a material part of the bargain between
the parties and the economic and other terms were negotiated and
agreed to by the parties in reliance on that allocation.
31. Export Law Controls; Export Assurance Declaration
31.1. Export Restrictions. Sprint agrees to comply with all export and
re-export restrictions and regulations imposed by the governments of
the United States or the country to which the Product is shipped to
Sprint. Sprint will not commit any act or omission which will result
in a breach of any such Export Requirements. Sprint agrees that it
will comply in all respects with any governmental laws, orders or
other restrictions on the export of Licensed copies of OSI or its
licensor's Product(s) (including any related information and
documentation) which may be imposed from time to time by the
government of the United States or the country which the OSI or its
licensor's Product(s) is shipped by OSI ("Export Requirements"). This
Article 31 shall survive the expiration or termination of the license
or this Agreement.
31.2. Data Encryption Standard.
Sprint acknowledges that:
(i) OSI Products contain routines which implement the U.S.
Government Data Encryption Standard ("DES") and (ii) that export of
DES technology is subject to legal restrictions under the U.S. Export
Administration Regulations.
Sprint agrees that:
(i) it will comply with all applicable export and re-export
restrictions under the U.S. Export Administration Regulations,
(ii) it will not export or re-export the Products to any country in
violation of such restrictions, and
(iii) the Products will not be re-exported to the People's Republic
of China, Iran, Syria or to countries included in prohibited Country
Groups of the U.S. Export Administration Regulations, or delivered to
national citizens of these countries, as currently listed under such
regulations.
32. No Modification
No modification, amendment, supplement to, or waiver of this Agreement,
Order, or the Schedule hereunder, or any provision thereof, will be binding
upon the parties unless made in writing and duly executed by authorized
representatives of both parties.
33. Headings
The headings of the various articles and sections in this Agreement are for
convenience and reference only, and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
Page 17 of 20
<PAGE>
34. Complete Agreement
This Agreement sets forth the entire understanding of the parties as to the
subject matter hereof and supersedes all prior or contemporaneous
agreements, discussions, and correspondence pertaining to the subject
matter hereof. Any preprinted terms and conditions on any order, invoice,
statement, etc. issued in connection with any Schedule hereunder by either
party will be of no force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement and the Schedule to
be executed, effective as of the day and year first set forth above, and do each
hereby warrant and represent that their respective signatory whose signature
appears below is duly authorized by all necessary and appropriate corporate
action to execute this Agreement.
SPRINT/UNITED MANAGEMENT COMPANY OBJECTIVE SYSTEMS INTEGRATORS
/s/ /s/
------------------------------ ------------------------------
Signature Sheila Miller Signature
Gregg B. Brelsford
- -------------------------------- ------------------------------
Print Name Sheila Miller Print Name
Managing Attorney
- --------------------------------- ------------------------------
Title Director Title
3/30/00 4/3/00
- --------------------------------- ------------------------------
Date Date
Page 17 of 20
<PAGE>
INDEX OF ATTACHMENTS & EXHIBITS
EXHIBITS
Exhibit A Product Schedule/Support Services
Exhibit B Pricing Proposal
(*)
Exhibit D NetExpert Performance Accounting Process
ATTACHMENTS
(*)
Attachment B Sprint's Travel & Reimbursement Policy
Attachment C Sprint's Principles of Business Conduct
Attachment D Transportation and Routing Guide
Page 19 of 20
<PAGE>
Page 1 of 6
EXHIBIT A
PRODUCT AND SUPPORT SERVICE SCHEDULE
This Product and Support Service Schedule to the Agreement (the "Schedule")
sets forth additional terms and conditions under which OSI provides Sprint
with VPS, Training, and Support Service, as further described herein. In
the event of any conflict between the Agreement and the Schedule, this
Schedule shall supersede the Agreement. Except as modified herein, the
terms and conditions (including any definitions) contained in the Agreement
remain in full force and effect.
SECTION I
1. Reseller Designation
The designated reseller is a third party coordinating distribution,
delivery, and copying of the Products, recordkeeping, auditing, and report
filing, acting on Sprint's behalf. Upon notice to OSI, Sprint may choose to
have the designated reseller acquire Products from OSI as ordered by Sprint
and/or its affiliates. Subject to the terms of the Agreement, all payments
to OSI, on behalf of Sprint and its affiliates, for the Products will be
made by designated reseller. Sprint retains the right to add or replace the
designated reseller upon written notice to OSI.
2. Product Pricing
Pricing is set forth in Exhibit B to the Agreement.
3. Software Evaluation.
Upon request, OSI will provide (*) copies of any Products solely for the
purposes of evaluation and testing in a non-production environment and
Sprint here represents and warrants that no copy of any Product provided to
Sprint pursuant to this Section 3 will be used in any commercial or
production environment whatsoever. Sprint's right to use a particular
Product for evaluation shall terminate one hundred and eighty (180) days
after the evaluation begins. Upon such termination, unless an Order is
issued for the Products, Sprint is obligated to delete from the temporary
memory (RAM) and permanent memory (e.g. hard disk, CD-ROM or other storage
device) of all computers all copies installed pursuant to this Article,
unless the parties mutually agree in writing to extend the evaluation
period.
4. Professional Services ("VPS") Between April 1, 2000 and September 30, 2000,
OSI will provide VPS to Sprint under the terms of the Agreement for (*) per
day. Between October 1, 2000 and March 31, 2003, OSI will provide VPS to
Sprint under the terms of the Agreement for (*) per day. Travel will be
reimbursed by Sprint for reasonable travel and expense incurred by OSI's
VPS personnel pursuant to Sprint's Travel and Reimbursement policy set
forth in Attachment B. One day of VPS is defined as one person for an eight
(8) hour day
5. Training
5.1 Grant of License for Training Materials. OSI hereby grants Sprint the
right to modify the Training materials, and to use and distribute the
Sprint-modified training documents (which may contain Sprint
trademarks) to any of its employees, agents and subcontractors,
wherever located provided the documents developed pursuant to this
Section 8.1 retain all appropriate OSI copyright notices and all OSI
trademarks and trademark designations.
5.2 OSI On-Site Training. Between April 1, 2000 and March 31, 2001, OSI
will offer training to Sprint according to OSI's standard training
policies.(*) After March 31, 2001 OSI will offer training to Sprint
according to OSI's standard training policies at OSI's then current
training prices. Student's travel and expenses are not included in the
fee.(*)
6. Special Bids
6.1. Special Bid Requests. OSI and Sprint agree that, from time to time,
Sprint will request, and OSI will provide to Sprint, bids where term,
product mix, configuration, or other special circumstances exist, in
Sprint's sole determination ("Special Bid"). OSI agrees to promptly
provide Special Bids in response to such requests.
6.2. Special Bid Validity. The prices for any Special Bid will be valid for
a mutually agreed upon period of time, and shall only be withdrawn
during such time if the project is canceled. If the agreed upon
validity period for the Special Bid has expired, the parties will
mutually agree to extend the validity period.
7. Invoices
<PAGE>
Page 2 of 6
Invoices will be prepared in one (1) original and one (1) copy and
submitted in accordance with Articles 8 of the Agreement and with the
following instructions:
Original Invoice: Sprint
Supplier Disbursements
KSOPKD0101
P.O. Box 7977
Overland Park, KS 66211
One Copy: Sprint
903 E. 104th Street
Mailstop: MOKCMW0708
Kansas City, MO 64131
8. Executive Briefings
Executive briefings will be provided by OSI, at OSI's expense, to discuss
new product plans, features, and directions of the OSI Products at least
once per year. OSI's executives and/or designees who will participate in
such briefings with Sprint executives and/or his designees, will be named
within ninety (90) days of execution.
9. Understanding of the Parties
The parties understand and agree that Sprint may, at Sprint's sole
discretion, exercise any or all of the following options to meet the future
needs of Sprint. In the event that Sprint elects any or all of these
options, the parties agree to facilitate Sprint's election of such
option(s) by executing any appropriate amendment(s) and/or new agreements,
containing terms and conditions mutually agreeable to both parties.
9.1. Future Products Option. Sprint may license Products and/or purchase
any services offered by OSI at discounts at least as favorable as
those already proffered to Sprint for OSI Products and services, as
set forth in this Schedule.
9.2. Systems Integrator Option. Sprint may desire to become a Systems
Integrator of OSI products. A "Systems Integrator" is defined as any
company which provides professional information processing services
which may include but is not limited to: Integration Technology
Consulting, Database Design/Implementation, Facilities Management,
Maintenance, Network Integration, Network Management, Desktop
Integration, Project Management, Remote Processing, Datacenter Design
and Construction, Software Development, Systems Integration, Training,
Outsourcing, and Business Process Re-engineering. If the parties
mutually agree that Sprint can become a Systems Integrator, OSI will
consider giving Sprint credit equal to procurement under this
Agreement, toward volumes needed to establish discount levels
available under the System Integrator agreement, if applicable.
SECTION II--SUPPORT SERVICES
1. DEFINITIONS
-----------
(a) Defect. An error in OSI Software or a failure of OSI Software to
------
conform materially with its then-current documentation that can be
reproduced by OSI. Defects fall into three categories as follows:
(1) Priority 1 (Production System Failure). Sprint's primary
--------------------------------------
production system (a) is completely unavailable, (b) has a
problem that occurs with sufficient frequency that the system is
effectively rendered inoperable, or (c) is affected such that
critical business processes are unavailable. In each case, no
Workaround can be immediately identified. For Priority 1 Defects,
both OSI and Sprint will commit full-time resources to resolve
the situation.
(2) Priority 2 (System Impairment) Sprint's business processes are
------------------------------
impacted or impaired, but still function and a satisfactory
Workaround can be identified or a secondary system brought
on-line.
(3) Priority 3 (Minor Fault). The impact on Sprint is minor and a
------------------------
satisfactory Workaround can be identified, the Defect has no
material operational impact on Sprint, or the Defect does not
require immediate attention.
(b) Emergency Release. A new version of OSI Software that incorporates
-----------------
Patches to rectify one or more Priority 1 or Priority 2 Defects. An
Emergency Release may include additional documentation.
(c) Patch. Replacement of, or provision of an addition to, a portion or
-----
module of OSI Software. A Patch may include additions or replacement
to existing documentation
(d) Remote Access. Access to Sprint's systems required by OSI to provide
-------------
Support Services, which may include dedicated connection, dial-up
modem, internet, telnet or other means by which OSI can gain the
required access. If Remote access is established, OSI's
<PAGE>
Page 3 of 6
access through Remote means will occur only after prior notice to
Sprint and a mutually agreeable time is established. Remote Access
will occur through a non-intrusive manner, and used only to enable OSI
to provide expedient Support Service.
(e) Workaround. A modification to the procedures Sprint follows or the
----------
data it supplies when using OSI Software. A Workaround is designed to
enable OSI Software to operate without materially and adversely
affecting Sprint's ability to use OSI Software in its production
environment.
2. GENERAL
-------
(a) NetExpert Framework Products. Provided Sprint (1) is current in paying
----------------------------
all applicable Support Services charges, as set forth in the Agreement
at the time Support Services charges are incurred, (2) is not in
breach of this Agreement, and (3) has provided OSI with timely Remote
Access to the affected system, OSI will provide to Sprint the Support
Services specified below. Support Services will be provided only for
the current generally available release, with all OSI recommended
NetExpert(R), operating system, database and other patches applied;
provided, that for one year after the introduction of a new major
release, OSI will use reasonable efforts to support the previous major
release. After that time, OSI will provide Support Services for
superseded major releases on a time and materials basis.
(b) Vendor Software. As part of Support Services, and provided they are
---------------
available for the form of Vendor Software licensed, OSI will procure
for Sprint's benefit annual maintenance agreements with its Vendors
for all Vendor Software, under terms and conditions no less favorable
than those set forth in the Agreement.
(c) Modified Application Components and Rulesets. Because Modified
--------------------------------------------
Application Components and Rulesets may vary between end-users even
for the same network element, management operation or other operation,
and because Application Components and Rulesets may be modified by
others after delivery by OSI, unless otherwise agreed to by OSI in
writing, Support Services for Modified Application Components and
Rulesets are provided only on a time and materials basis. The
following Sections describe the limited Support Services available for
Application Components and Rulesets when such Support Services are
made available by OSI.
3. UPDATE SERVICES
---------------
(a) NetExpert Framework Product Updates. On request by Sprint, OSI will
-----------------------------------
provide Sprint at no additional cost with new and interim major and
maintenance releases NetExpert Framework Products for Authorized
Computers at the time they are generally made available to its other
customers. OSI will make such revisions and enhancements to NetExpert
Framework Products as it deems necessary and appropriate. OSI may
discontinue updating NetExpert Framework Products at any time or may
incorporate any portion of existing NetExpert Framework Products into
a new and distinct Product after the Period of Assured Availability as
set forth in the Agreement. In the latter case, OSI will offer to make
the new Product available to Sprint at its then-current or a mutually
negotiated Price.
(b) Vendor Software Updates. Vendors will, from time to time, release new
-----------------------
products or new or interim versions of Vendor Software that OSI will
incorporate into or use with OSI Software. OSI will inform Sprint of
Vendor new releases when, in OSI's judgment, they may be appropriate
for use in or with OSI Software. For Vendor Software licensed to
Sprint by OSI, new releases which OSI has the right to sublicense will
be made available to Sprint in a timely manner consistent with their
receipt from the Vendor and at OSI's then-current Prices.
(c) Application Components and Rulesets. Generally, Application Components
-----------------------------------
and Rulesets are only updated on a time and materials basis.
Occasionally OSI may update an Application Component or Ruleset for a
new release of network element software, but unless OSI has agreed
otherwise with Sprint, that updated Application Component or Ruleset
will be made available for license by payment of a separate license
fee, and integration and customization of that Application Component
or Ruleset into Sprint's system will be required either by OSI, by
Sprint or by a party contracted by Sprint.
4. EXTENDED WARRANTY SERVICES
--------------------------
(a) Extended Warranty. By maintaining a current subscription for Support
-----------------
Services for a Product, the limited warranty provided in the Agreement
will, subject to the terms of the Agreement, be extended as set forth
in this Section 4 for that Product.
(b) NetExpert Framework Products. If Sprint believes that there is a
----------------------------
Defect in NetExpert Framework Products, Sprint will (1) promptly
notify OSI, describing the parameters, procedures and conditions that
result from the Defect in sufficient detail to permit OSI to isolate
the code that caused the Defect, and (2) provide OSI with all data
files, database rules, Sprint Software and Remote Access (and where
required by OSI, onsite access) required to reproduce and analyze the
Defect. If OSI is unable to reproduce the Defect, it will have no
responsibility to take further action.
(c) Application Components and Rulesets. When Support Services are
-----------------------------------
available for Application Components or Rulesets, the OSI Extended
Warranty only covers Application Components and Rulesets in the form
provided by OSI; on receipt by OSI of the notice described in Section
4(b), OSI will analyze the Application Component or Ruleset in the
form provided by OSI to determine if the Defect is reproducible. OSI
will have no obligation for Defects not in the original Application
Component or Ruleset provided by OSI.
<PAGE>
Page 4 of 6
(d) Vendor Software. For Vendor Software where a support agreement is in
---------------
place between OSI and the Vendor, OSI will use commercially reasonable
efforts to verify all Defects in the Vendor Software within a
reasonable period of time and to obtain a prompt resolution of the
Defect from the Vendor.
(e) Response Times. On notice of a Defect, OSI will during normal business
--------------
hours (unless Premium Extended Services are purchased as described in
Section 4(g)) (1) initiate work to verify the Defect, (2) advise
Sprint of its plans for resolving the Defect, and (3) use commercially
reasonable efforts to resolve the Defect, as follows, and OSI will
promptly notify Sprint if a Defect cannot be resolved within these
time periods and will cooperate in good faith with Sprint to arrive at
an alternative period for resolution:
(1) Priority 1. OSI will promptly initiate work to verify a Priority
----------
1 Defect within one hour of being notified and will use
commercially reasonable efforts to resolve the Defect within 5
business days. Support will continue, uninterrupted until the
system becomes operational. After that, OSI will use its best
efforts to promptly seek to determine the cause of the Priority 1
Defect and then to correct it and to ensure that the OSI Software
is performing in accordance with the product specifications
and/or user documentation.
(2) Priority 2. OSI will initiate work to verify a Priority 2 Defect
----------
no later than the next business day and will use commercially
reasonable efforts to resolve the Defect within 10 business days.
(3) Priority 3. OSI will initiate work to verify a Priority 3 Defect
----------
within 30 business days and will use commercially reasonable
efforts to include a Patch for the Defect in the next update or
version of OSI Software provided Sprint as applicable.
(4) After the response times indicated in this section 4(e), if
Sprint is not satisfied with the efforts being made by OSI Sprint
will have the right to contact, at its discretion, the Manager of
Technical Support Services of OSI (currently Jeff Lombardi at
ext. 4785) or the Vice President of Technical Support Services
(currently Sallie Sutter at ext. 4208) or the Executive Vice
President of Sales for OSI (currently Dan Line, ext. 2251).
(f) Response. OSI will work diligently to resolve Priority 1 and Priority
--------
2 Defects with either Workarounds, Patches or Emergency Releases.
Whenever practical, OSI will verbally advise Sprint of a Workaround,
followed by a confirmation posted on WebTAC or otherwise provided in
writing to Sprint. If a Workaround does not resolve the Defect, OSI
will use commercially reasonable efforts to provide a Patch or
Emergency Release. If a Workaround is provided and resolves the
Defect, it will be downgraded to Priority 3.
(g) Premium Extended Services. 24 hour-a-day, 7 days-a-week Support
-------------------------
Services are available for NetExpert Framework Products at an extra
charge as shown in the Price List. If Sprint purchases this option,
the following additional Support Services are available for resolution
of Priority 1 Defects:
(1) Response. Sprint will be provided with a support telephone/paging
--------
number. OSI will attempt to respond within 15 minutes of
receiving Sprint's call, message or page and will promptly
initiate work to verify the Priority 1 Defect.
(2) Resolution. OSI will use commercially reasonable efforts to
---------
resolve the Priority 1 Defect within 2 hours and, if unable to
resolve the Defect within that period, will continue diligently
to pursue resolution of the Defect.
5. GENERAL ASSISTANCE
------------------
As a part of Support Services, OSI will provide Sprint with a reasonable
amount of generalized advice regarding the proper installation,
configuration and operation of OSI Software in the form provided by OSI.
Additional General Support Services are available on a time and materials
basis.
6. HOTLINE SERVICES
----------------
Telephone Hotline Support will be available from 6:00 a.m. to 5:00 p.m.,
Pacific Standard Time, Monday through Friday (excluding OSI holidays) for
Extended Warranty Services and General Support Services. The Hotline
Support number is 800-854-7184.
7. WEBTAC
------
Subject to system availability, Sprint will have 24 hour-a-day, 7 days-a-
week access to OSI's Technical Assistance Center on the World Wide Web, URL
http://tac.osi.com/. Use of OSI's WebTAC is subject to the terms and
procedures posted on that site.
8. GENERAL MATTERS
---------------
(a) Contacts and Internal Support.
-----------------------------
(1) Sprint will designate in writing to OSI's Vice-President for
Technical Services two employees for each division (i.e. LTD,
LDD, PCS) or Affiliate who will be the primary contact persons
and two employees for each division or Affiliate who will be
<PAGE>
Page 5 of 6
the backup contact persons (any of whom is the "Contact Person")
for all matters related to Support Services. The Contact Person
will have successfully completed all relevant OSI training as
designated by OSI. Only the Contact Person will be entitled to
make use of Extended or Hotline Services or OSI's WebTAC.
(2) If a Sprint Contact Person is unable to provide a resolution to a
Support Service issue, the Sprint Contact Person will in turn
escalate each issue to the OSI Manager of Technical Support
Services (currently Jeff Lombardi at ext. 4785).
(3) All requests for Support Services and other assistance from
within Sprint's organization will be made through the Contact
Person. Sprint will be responsible for taking and documenting the
following actions to the extent appropriate prior to and after
reporting any Defect to OSI, and Sprint will commit appropriate
resources to working on the Defect until the source of the Defect
is agreed upon:
(A) Maintaining an up-to-date record of system changes such as
upgrades, patches and modifications to operating systems,
databases, device software and Products;
(B) Gathering all relevant information from the user reporting
the Defect;
(C) Identifying the nature of the Defect;
(D) Reproducing the error and documenting the steps required for
that reproduction;
(E) Eliminating physical causes such as connections, device
malfunctions and memory and operating system problems;
(F) Examining logs, records, archives, core files and other user
documentation;
(G) Reaching where possible a tentative conclusion regarding
causation;
(H) Providing OSI with proper remote connectivity and other
documentation and assistance required in connection with the
Support Services; and
(I) To the extent appropriate, interfacing with distributors of
interfacing systems such as the operating system, database
programs and other hardware and software, and working with
those distributors to eliminate or identify errors in their
systems.
(b) Commencement. The first year of Support Services for each item of OSI
------------
Software begins on its Installation Date ("Services Commencement").
Renewal fees will be paid yearly in advance in conjunction with the
effective date of the Agreement and any additional fees if incurred when
adding licenses will be prorated to co-terminate with the existing Support
Service.
(c) Comprehensive Coverage. Because of the interconnection between versions of
----------------------
NetExpert Framework Products and Vendor Software, if Sprint renews Support
Services on at least one computer for one NetExpert Framework Product,
Sprint must renew Support Services for all NetExpert Framework Products it
has licensed. Sprint has the option to purchase available Support
Services, if any, for all, some or none of the Application Components or
Rulesets it licenses from OSI.
(d) Automatic Renewal. Support Services will automatically renew each year
-----------------
unless Sprint cancels by notice to OSI with at least 30 days.
(e) Cancellation. Support Services will be canceled as to a Product if and
------------
when the license granted to Sprint for that Product is terminated. Support
Services will also be canceled at the end of any annual period if Sprint
has not paid the applicable renewal fees before the end of the term. Any
unearned, prepaid amounts, paid for such Support Services shall be refunded
to Sprint immediately upon any termination. If Support Services are
canceled, they will be canceled, effective immediately, for all OSI
Software and Vendor Software Cancellation of any Support Services will
not, of itself, constitute termination of the Agreement. OSI may terminate
Support Service with respect to a any Product upon ninety (90) days notice
prior to the expiration of an annual Support Service term, but only
following expiration of the Period of Assured Availability set forth in
Section 14 of the Agreement.
(f) Reinstatement. Sprint can reinstate Support Services by paying all Support
-------------
Services fees that are in arrears. and any mutually agreed to costs, on a
time and material basis, that OSI incurs to update installations to the
current version of OSI Software.
(g) Modifications and Unauthorized Uses. OSI will have no obligation to
-----------------------------------
support OSI Software if it (1) has been modified by Sprint, or (2) is being
used in violation of the terms of the Agreement. If a reported Defect is
not a Defect in Products but is actually a problem caused by user error,
modification of Products by a party other than OSI, or third party hardware
or software other than Vendor Software for which Support Services have been
purchased, OSI will have the right to invoice Sprint on a time and
materials basis for efforts provided by OSI personnel above 8 hours for
each such Defect reported to OSI.
(h) Limitations. UNDER THE OSI EXTENDED WARRANTY, OSI WILL USE COMMERCIALLY
-----------
REASONABLE EFFORTS TO REPAIR DEFECTS, BUT OSI DOES NOT GUARANTEE THAT IT
WILL BE ABLE TO REPAIR ALL DEFECTS, OR THAT ANY REPAIR WILL BE SATISFACTORY
TOSPRINT.
9. Data Elements. The following Data Elements will be captured by OSI via
their problem tracking system for each issue reported to OSI (these Data
Elements are available on demand at OSI WebTAC).
<PAGE>
Page 6 of 6
9.1. Metric 1. Date/time of initial problem report to OSI. When not
answered, Sprint personnel will note the date/time of the call, log
the failure with OSI, and obtain support.
9.2. Metric 2. Issues will be logged through direct contact with OSI's
Support Service personnel using the OSI's toll free number or entered
via OSI's WebTAC. A unique case tracking or case identifier number
will be assigned to each issue reported. Sprint may use OSI WebTAC
electronic services to obtain OSI information and view progress made
on the problem.
9.3. Metric 3. The date/time of OSI notes and progress towards resolving
the reported issue will be recorded in the case tracking log and
available for Sprint's review on WebTAC.
9.4. Metric 4. Issue fix Date/time will be entered in the case tracking log
in the same manner as all other status updates. Sprint's Contact
Person for OSI and OSI's Support Service will enter the Date/time that
OSI and Sprint verify that the verification testing is completed. Upon
successful test, the trouble ticket will be closed.
9.5. Metric 5. OSI's status reports on each reported case will be available
on demand via WebTAC for all open as well as for all closed cases.
9.6. Metric 6. In the case tracking log, the Date/time for the initial call
(Metric 1), and the Date/time when a workaround or fix was identified
and communicated from OSI to Sprint is recorded.
<PAGE>
SPRINT EXHIBIT B (*)
<PAGE>
Exhibit C (*)
<PAGE>
Exhibit D (*)
<PAGE>
ATTACHMENT A (*)
<PAGE>
Attachment B
SPRINT'S TRAVEL AND EXPENSE REIMBURSEMENT POLICY
Supplier will be reimbursed for travel, living, and other expenses authorized
by Sprint under the Agreement at reasonable and actual costs. Travel and living
expenses will not be reimbursed unless they are in conformance with Sprint's
travel reimbursement policies.
All travel (coach and economy class only) which is to be reimbursed by Sprint
and/or its affiliates should be booked through the Sprint Business Travel Center
by calling (800) 347-2639. When making travel arrangements, please acknowledge
that you are a supplier for Sprint. Booking through the Sprint Business Travel
Center will allow for least cost to Sprint. The passenger flight coupon and
travel itinerary must be attached to the Supplier's expense report.
The Supplier's travel (coach and economy class only) expenditures should be
appropriate to Sprint's business undertaken, and reasonable in the judgment of
both Sprint and the Supplier. For reimbursement, Supplier must submit original
receipts greater than $15 for meals (tear tab receipts are not accepted);
however, hotel, car rental, fuel for rental cars require receipts regardless of
the amount. Supplier will be reimbursed for use of a personal vehicle for
business purposes at the then current rate (based on current IRS regulations)
in effect, plus parking and toll fees. Supplier will utilize reasonable parking
facilities and rates. Parking receipts are required for reimbursement of $15 or
more.
Sprint will not reimburse Supplier for personal expenses including long distance
telephone calls.
<PAGE>
The Sprint Principles of Business Conduct
The Integrity Behind the Pin Drop
Sprint
<PAGE>
Dear Sprint Associates,
[PHOTO]
The Sprint Principles of Business Conduct applies to all of us in our work. The
principles are not abstract and unachievable ideas. They are principles that we
will apply in our work to help form our decisions on a daily basis.
Sprint employees are good and moral people who want to do the right thing.
However, good intentions are not enough. In order to make good and ethical
business decisions, we all need an awareness of our ethical principles and some
examples of how these principles apply on the job. The Sprint Principles of
Business Conduct provides both.
Sprint's reputation for doing the right thing is priceless. We are proud to
work at Sprint because all of us have devoted ourselves to making good decisions
for our customers, employees, shareholders, partners and suppliers. As a
result, Sprint enjoys an excellent reputation, and this priceless asset benefits
us all. With that reputation, Sprint is the preferred communications company
with which to do business. It is the standard by which other companies are
measured; it is a place that attracts customers and new employees. Without its
good reputation, Sprint cannot succeed. The responsibility to preserve and
enhance that reputation lies with each of us. And there's only one way to
accomplish this: to act with integrity in everything we do.
Integrity is what The Sprint Principles of Business Conduct is all about. Our
principles must define our relationships with customers, business partners,
investors and each other. Everything else is secondary. Please join me in
making Sprint the ethical leader by which all telecommunications companies are
measured.
Sincerely,
Bill Essey
Chairman and Chief Executive Officer
<PAGE>
<TABLE>
<CAPTION>
Table of Contents: Opportunities
<S> <C>
1 Chairman's Letter Inside Information and Securities Trading
3 Sprint's Vision Outside Employment & Activities
4 Ethics Outlook 17 Employee Relations
5 Introduction Discrimination
History and the Future Sexual Harassment & Related Issues
Purpose of the Sprint Principles Employee Privacy
Violations and their Consequences 19 Gifts, Favors, Travel & Entertainment
Managers Have an Additional Responsibility Gifts
Certification Process (1/800-337-9073) Favors
7 Inquiry Process Travel & Entertainment
Helpline (1/800-788-7844) Disclosure
Obligation to Report 21 Government Customers
Retaliation and False Reports 22 International Business Practices
8 Accuracy of Company Records Accounting
9 Company Assets: Protection and Use Anti-boycott
Protecting Company Assets Export Control
Proprietary Information Foreign Corrupt Practices Act
Communications with Sprint's Attorneys Regulatory Compliance Guidelines
Trademarks and the Sprint Name 24 Political/Community Activities
Computers and Network Security Community Support
Inquiries from the Government or Media Personal Community Activities
Creating and Retaining Business Communications Political Activities
12 Completion 25 Procurement Practices
14 Conflicts of Interest 26 Property Rights of Others
Disclosure Competitive Information
Board Memberships Customer Privacy
Family Members 27 Safety, Health & Environment
Gifts, Favors, Travel & Entertainment (See Gift Section Page 19) Drugs and Alcohol
Investments and Other Financial Environment
Quality and Service
Safety and Health
29 Sales and Marketing
30 Additional Resources
31 Index
</TABLE>
<PAGE>
Sprint's Vision, Goals and Values
Vision
Our vision is to be a world-class telecommunications company--the standard by
which others are measured.
Goals
Our goals are to achieve:
Exception Customer Satisfaction
Inspired, Innovative and Empowered Employees, and
Superior Financial Results
Values
Customer First
We anticipate, understand, meet and exceed our customers' needs and expectations
to achieve Exceptional Customer Satisfaction.
Integrity in all we do
Our actions and decisions reflect the highest ethical, legal and professional
standards.
Excellence through quality
We will individually and collectively use Sprint Quality in our daily activities
to achieve excellence as a Company.
Respect for each other
We are about the Company, our work, our customers and each other. This caring
is a unique source of our Company's energy, strength and excellence.
Growth through change
We will grow as a Company, as individuals and as professionals by creating,
anticipating and responding to change.
Community commitment
We willingly serve the charitable and civic needs of our communities.
Product work environment
We provide a safe and accessible work environment.
Representative workforce
We recruit and develop individuals who reflect the diversity of our communities.
Shareholder value
We will increase shareholder value, build the financial strength of the Company
and, as a result, prosper as individuals.
<PAGE>
Ask questions when
you have doubts
about the ethical [PHOTO]
implications of any
situation.
Ethics Quick Test
Sprint values integrity, and wants to maintain its reputation for doing the
right thing. If you're ever in a situation where the right thing is unclear or
doing the right thing is difficult, examine your options with the Ethics Test:
. Could it harm Sprint's reputation?
. Is it ethical and legal?
. What would my family and friends say?
. How will it look in the newspaper?
. Would I bet my job on it?
. Should I check?
. How would my action appear to others?
Helpline 1/800-788-7844,
Write to: MOKCMP0503, Attn: Ethics Group, or
Send via Intranet: http://144.223.26.103/law/gbt/html/fdbk.html
(You may remain anonymous)
Sprint's reputation, and your conscience and good name, are far too valuable to
do anything that wouldn't pass the Ethics Test. In a nutshell, this means that
all of us must tell the truth and fulfill our promises. And we must treat all
stakeholders-fellow employees, customers, suppliers, investors and communities-
with honesty, decency and respect.
<PAGE>
INTRODUCTION
HISTORY AND THE FUTURE
Integrity and ethics have been important at Sprint for the 100 years we've been
in business. We have a rich legacy of honest, reliable service to customers and
communities. We have an equally strong tradition of offering good jobs and
treating each other with respect. This combination has worked in the past--and
it's a requirement for success in the future. Our need to treat our customers,
colleagues and communities with integrity grows greater. It is for this reason
that we have updated our Code of Ethics and replaced it with The Sprint
Principles of Business Conduct. Acting with integrity is not just the right
thing to do, it's the guiding principle that makes Sprint the best
communications company in the world.
PURPOSE OF THE SPRINT PRINCIPLES
The Sprint Principles of Business Conduct describes the ethical and legal
responsibilities of all Sprint employees and of all those who represent Sprint's
good name. As a guide and a resource, it is intended to alert employees to
significant legal and ethical issues that frequently arise. It is not a
comprehensive rulebook, but rather a statement of the way Sprint does business.
The Sprint Principles reflects the company's core values and commitment to
integrity in everything it does. Of course, The Sprint Principles cannot
explicitly cover all situations or circumstances. It also cannot be a substitute
for the good judgment of employees and managers. Sprint's "open door" philosophy
encourages employees to bring any problems, disagreements, questions,
recommendations or comments to their immediate supervisor, a representative of
Human Resources staff, the Helpline (1/800-788-7844) or any member of
management.
VIOLATIONS AND THEIR CONSEQUENCES
Failure to meet The Sprint Principles will compromise the good name Sprint has
worked hard to build, and may result in disciplinary action, including
termination of employment. Unethical or illegal acts cannot be justified by
saying that they benefited the company, or that they were directed by a higher
authority in the organization. No employee ever is authorized by the company to
commit, or direct another employee to commit, an unethical or illegal act.
Additionally, employees cannot use a contractor, agent, consultant, broker,
distributor or other third party to perform any act prohibited by law or by The
Sprint Principles.
<PAGE>
MANAGERS HAVE AN ADDITIONAL RESPONSIBILITY
Managers are expected to exemplify the highest standards of ethical business
conduct and to encourage discussion of the ethical and legal implications of
business decisions. In addition, managers have a responsibility to create and
sustain a work environment in which employees, consultants and contractors know
that ethical and legal behavior is expected of them. This responsibility
includes ensuring that The Sprint Principles, as well as applicable law and
policy, are communicated to all those working for that manager.
CERTIFICATION PROCESS (1/800-337-9073)
As a condition of employment, all Sprint employees are required to comply with
The Sprint Principles of Business Conduct. To certify that you have read The
Sprint Principles of Business Conduct and that you agree to abide by the
policies and guidelines of the company as set forth in it, call the
Certification Line at 1/800-337-9073.
All Sprint employees are
required to comply with
The Sprint Principles
of Business Conduct.
To certify that you have [PHOTO
read The Sprint Principles
of Business Conduct and
that you agree to abide
by the policies and
guidelines of the company
as set forth in it, call
the Certification Line
at 1/800-337-9073.
<PAGE>
INQUIRY PROCESS
If you have questions about the meaning of The Sprint Principles or about
applying it to particular situations, the first place to turn is to your
supervisor. Your supervisor will work with you, Human Resources, the Law
Department or the Helpline to get an answer. If you do not receive a clear
explanation or believe you may not receive a fair or adequate review of the
issue from your management, call the Helpline at 1-800-788-7844.
HELPLINE at 1/800-788-7844
The Helpline is staffed during business hours by fellow employees skilled in
responding to your questions and concerns. They take your calls seriously. Calls
or letters to the Helpline may be made anonymously. Anonymous callers will be
advised if additional information is required before an effective investigation
can take place. Callers who wish to follow up on their call will be assigned a
confidential ID number. Staff at the Helpline will work with you to address your
question or concern. If necessary, the Helpline will refer your concern to an
appropriate department such as Corporate Security, Law or Human Resources, and
will monitor the results of any investigations. The Helpline strives to make
sure that all questions or concerns are handled thoroughly and appropriately.
Confidentiality for all those who report concerns will be maintained to the
fullest extent possible.
Sprint's Chief Ethics Officer is responsible for the Helpline and the Ethics
Program. This Program includes not only developing policies and procedures, but
also provides training and guidance to employees. The Chief Ethics Officer
encourages any employee with suggestions or comments on improving our Ethics
Program to contact the Helpline.
OBLIGATION TO REPORT
To protect Sprint's reputation--and yours--you are required to report illegal or
unethical conduct to the company. This report should be made promptly to your
management or to Human Resources. If you have any concern about reporting the
wrongdoing to your management or Human Resources, you should call the Helpline.
Failure to promptly report such conduct could allow wrongdoing to continue,
subjecting the company and its employees to greater harm. Supervisors are
encouraged to call the Helpline for assistance.
RETALIATION AND FALSE REPORTS
When raising an ethics issue, you may choose either to remain anonymous or to
ask the Ethics Group to keep your identity confidential. Any retaliation against
an employee who, in good faith, reports a violation or suspected violation of
The Sprint Principles is strictly forbidden and should be reported immediately.
Making malicious or intentionally false reports is also a violation of The
Sprint Principles.
QUESTION:
I'm pretty sure that some of the things going on where I work may be improper,
but I don't want to report them and get into trouble. What can I do?
ANSWER:
While it's a difficult situation,
<PAGE>
you are required to report illegal or unethical conduct to the company. The
company will pursue an investigation if there are enough facts to support one.
<PAGE>
ACCURACY OF COMPANY RECORDS [PHOTO]
QUESTION:
My supervisor is having a business dinner and has asked me to attend. At the end
of the dinner, my supervisor asked me to pay the bill and write it off on my
expense report, and not place his name on the list of attendees. Is there
anything wrong with this?
ANSWER:
It's okay for you to pay and expense the bill. But the names of all attendees at
the dinner must be listed on the expense report. Sprint relies on accurate
information and reliable records to make responsible business decisions. The
company requires honest and accurate recording, reporting and retention of
information. This includes business records such as quality, safety and
personnel, as well as financial records.
All financial books, records and accounts must accurately reflect transactions
and events, and conform both to generally accepted accounting principles and to
Sprint's system of internal controls. Here are additional guidelines to keep in
mind:
. False or misleading entries or omissions may not be made in any Sprint
systems, books or records for any reason. Keep systems, books, records and
accounts in reasonable detail, so that they accurately reflect transactions and
events.
. Expense reports and time reporting must be filled out accurately and
completely, with expense reports showing the correct purpose and amount of each
item.
. No secret or unrecorded funds, assets or accounts may be created or maintained
for any purpose.
. Never intentionally make a payment or approve an invoice, expense report or
other document that is incorrect, misleading or inaccurate. Always use care in
reviewing documents before approving them.
<PAGE>
COMPANY ASSETS: PROTECTION AND USE
PROTECTING COMPANY ASSETS
Sprint entrusts all employees with numerous company assets.
Everyone has a special responsibility to protect assets from loss, damage,
misuse or theft. Company assets are to be used for the benefit of Sprint
and not for personal gain. Any non-business use requires the prior
approval of your supervisor. For example, using the Internet and/or e-mail
for significant non-business use is unacceptable.
The assets of Sprint include financial assets, buildings, equipment,
supplies, the time it pays its employees to work and much more. For
example, among Sprint's most valuable assets is intellectual property.
Intellectual property includes software, research and development
information, new product or marketing plans, business concepts and
strategies, and detailed financial data.
Sprint owns any intellectual property made, created, developed,
written or conceived by you, either solely or jointly with another, during
your employment with Sprint that:
. results from any work performed by you for Sprint;
. relates to the actual or anticipated business, research or development
of Sprint; or
. is developed with the use of Sprint's time, equipment, supplies,
proprietary information or facilities.
PROPRIETARY INFORMATION
Sprint strives to protect its intellectual property through patents,
copyrights, trademarks and other safeguards. A trade secret is useful
information
known by Sprint, but not generally known by our competitors or
other third parties. Vigilantly safeguard trade secrets and proprietary
information by marking information accordingly, keeping it secure and
limiting access to those who have a need-to-know in order to do their job.
Sprint's Protection of Proprietary Information Policy and Practices
provides specific rules for safeguarding the company's proprietary information,
including guides for use of computer systems, e-mail, voicemail
and the Internet.
Employees must avoid discussing confidential or competitive information
in public areas. Many companies' secrets have been lost in
elevators, restaurants and airplanes. The obligation to preserve Sprint's
proprietary information continues after employment ends.
QUESTION:
I have worked for Sprint for several years now and check my Sprint e-mail
approximately four times a day to make sure I'm on top of things and communicate
with my peers. I also belong to a sports club and have an extensive network of
friends. Members of the club stay in touch and send many e-mails to me on a
daily basis and we use the Sprint conference line to discuss club business. Is
this okay?
ANSWER:
No. All company assets are to be used for the benefit of Sprint and not for
personal
<PAGE>
gain. Your conference calls should not be paid by Sprint, and the numerous
e-mails appear to interfere with your job. You should initially discuss these
issues with your supervisor.
<PAGE>
QUESTION:
I believe one of our sales reps is working for a Sprint competitor on the side
and stealing Sprint customer information. What should I do?
ANSWER: Advise your supervisor, Human Resources or the Helpline. This is an
immediate threat to Sprint and not only a conflict of interest but also violates
the Sprint Protection of Proprietary Information Policy and Practices.
QUESTION:
I've come up with a new name for a product my group will be rolling out next
month. What procedures should I follow to avoid a trademark violation?
ANSWER:
Use of a new or replacement name for a product or service must first be approved
by the Trademark Group in the Law Department. If you would like to have the
Trademark Group mine whether a proposed mark is available for use, please
contact the Law Department (913/624-6843).
COMMUNICATIONS WITH SPRINT'S ATTORNEYS
Information you communicate to Sprint's attorneys in order to obtain legal
advice concerning company business generally is protected by the attorney-client
communication privilege. This privilege protects from disclosure to others
confidential communications between Sprint's associates and Sprint's attorneys
for the purpose of obtaining legal advice on company business matters. The
privilege belongs to the company, not to Sprint's associates. You should keep
such communications confidential and refrain from sharing them with others,
including other Sprint associates, except on a need-to-know basis. Because the
privilege belongs to the company, Sprint's attorneys may share any information
provided by associates with Sprint's management.
Sprint's attorneys represent the company and should not be contacted-Immediately
by employees for advice regarding any individual employment issues. The Human
Resources Department is available to assist employees in resolving such issues.
Please consult the Law Department if you have any questions concerning your
communications with Sprint's attorneys.
TRADEMARKS AND THE SPRINT NAME
The Sprint brand identity, including its name, logo, trademarks and service
marks are among the most valuable assets of the company. To protect these
assets, you must use them appropriately and for purposes of advancing the
company's interests. Consult the Law Department, (913/624-6843), with questions
or concerns about the use of Sprint's trademarks.
<PAGE>
COMPUTER AND NETWORK SECURITY
Sprint's business depends on the continuous, efficient operation of its computer
systems and network. The company has an enormous investment in these assets.
These systems also play a critical role in global communications and security.
You must safeguard their integrity and confidentiality. Do your part by
protecting passwords, IDs and access to computer systems and all our facilities.
Take precautions against intrusion by "viruses" from the Internet or
unauthorized software. And protect the company from lawsuits by using only
legally licensed software. deter-INQUIRIES FROM THE GOVERNMENT OR THE MEDIA
Sprint cooperates with requests from government agencies and authorities,
including utility commissions. To safeguard legal rights, requests for
information (other than routine forms), such as subpoenas, should be reported to
the Law Department immediately. Contact the Law Department for guidance before
responding to any such request. All information provided must be truthful and
accurate. Never mislead any investigator, and never alter or destroy documents
or records in response to an investigation.
<PAGE>
QUESTION:
As a manager, I sometimes receive subpoenas requesting information with regard
to one of my employees. Is it okay to provide this information?
ANSWER:
You should contact the Law Department for guidance in handling.
QUESTION:
How long should I keep my e-mail messages?
ANSWER:
You should delete your e-mail messages after 45 days unless you are required by
law or have a business need to retain them longer.
Requests from the media, financial analysts and stockholders should be forwarded
to Corporate Communications to ensure professional handling.
CREATING AND RETAINING BUSINESS COMMUNICATIONS
Almost all business records and communications may become subject to public
disclosure in the course of litigation or governmental investigations. Business
communications are also often obtained by outside parties or the media.
Employees should therefore attempt to be as clear, concise, truthful and
accurate as possible when creating any information. Avoid exaggeration, colorful
language, guesswork, legal conclusions and derogatory characterizations of
people or their motives. This policy applies to communications of all kinds,
including e-mail and "informal" notes or memos.
Records always should be retained and destroyed according to Sprint's Records
Retention Policy. If litigation, an audit or a government investigation is
pending, do not destroy any related records. Any question related to documents
regarding an investigation should be directed to the Law Department (913-624-
6843).
We each have a special responsibility to safeguard the integrity and
confidentiality of company assets. [PHOTO].
<PAGE>
Competition is the cornerstone of a vibrant economy. Sprint competes vigorously
in an ethical and legitimate manner. [PHOTO]
The antitrust laws of the U.S. and the fair competition laws of many other
countries were developed to encourage healthy competition among businesses and
to protect consumers against anti-competitive acts.
These laws can be very complex. This section very briefly summarizes several
issues common to many of them. If you have questions, contact the Law
Department.
. Agreements between competitors that limit competition are illegal. Fixing
prices or terms of sale; allocating products, markets, territories or customers;
or agreeing to boycott certain customers or suppliers are examples of
violations.
. Even talking about these issues with competitors may be considered an
agreement. Never discuss or even listen to a discussion of present or future
prices, profit margins or costs, bids or
<PAGE>
intended bids, terms or conditions of sale, market shares, sales territories,
distribution practices or other competitive information with a competitor's
representative.
. Disclosing the company's bid or soliciting information about a competitor's
confidential bid proposal may be considered a form of hidden agreement, and must
not be attempted.
. Customers must not be required, as a condition to doing business, to take a
product or service they do not want in order to get from Sprint a product or
service they do want. Where the customer is a reseller (and not an authorized
Sprint sales agent) Sprint cannot set the customer's resale prices or other
terms or conditions of sale.
. The antitrust laws also prohibit monopolization or attempts to monopolize.
Sprint could be held liable for antitrust claims to impair competition for
telecommunications services if inappropriate actions are taken. Sprint must
never impede any customer's telecommunications decisions, or unreasonably
discriminate against competitors desiring access to its network with valid
business reasons (like capability constraints).
It is the responsibility of any individual who has a question about potential
antitrust implications of a discussion, decision or action to consult with the
Law Department before such action takes place.
Disclosing the company's bid or soliciting information about a competitor's
confidential bid proposal may be a form of hidden agreement, and must not be
attempted. [PHOTO]
QUESTION:
I'm a good friend of a sales-person for a competitor. Naturally, when we go out
for dinner or drinks we often trade tales about the telecommunications industry
and about the latest marketing and pricing schemes our companies have dreamed
up. There isn't a problem, is there?
ANSWER:
You are in two highly dangerous areas. Sprint has invested time and money in the
confidential marketing plans you are revealing, so you may be divulging Sprint's
proprietary information. In addition, a discussion of marketing and pricing with
any competitor's representative may appear to be collusion and therefore may be
a violation of antitrust laws. Find another shared interest for conversation.
You should call the Helpline (1/800-788-7844) for assistance.
<PAGE>
Conflicts of Interest
(Board Memberships, Family Members, Investments and Other Financial
Opportunities, Inside Information and Securities Trading, and Outside Employment
and Activities)
Business decisions and actions must be based wholly on the best interests of
Sprint and not be motivated by personal considerations or relationships.
Relationships with prospective or existing suppliers, contractors, customers,
competitors or regulators must not affect your independent and sound judgment on
behalf of Sprint. Any situation that creates or appears to create a conflict of
interest with the interests of Sprint must be avoided.
DISCLOSURE
The best way to avoid embarrassing conflict of interest situations is to
disclose any relationships that have the potential to be misinterpreted by
others. This includes any relationships with other employees, customers,
suppliers and competitors. Questions about potential conflict of interest
situations, and disclosure of these situations as they arise, should be
addressed promptly with your supervisor or the Helpline.
BOARD MEMBERSHIPS
You are permitted to serve on the board of directors of community or not-for-
profit organizations if the activity does not diminish your capability to
perform your duties for Sprint. However, to make sure these activities do not
create a conflict of interest or other problem with your Sprint employment, you
must notify your supervisor of your membership. You must report to and obtain
approval from your supervisor before becoming a member of the board of directors
of any for-profit organization. You must not serve as a member of the board of
directors of any company that is a competitor of Sprint or has a significant
commercial relationship with Sprint.
FAMILY MEMBERS
A conflict of interest may arise when doing business or competing with
organizations that employ family members or in which family members have an
ownership interest. Family members are broadly defined by Human Resources
policy. You should disclose any such relationships to your supervisor, who will
consult with the Law Department or the Helpline to determine the best course of
action.
QUESTION:
May I sit on the Board of Governors for the Computer Museum in Dallas, Texas?
ANSWER:
You are permitted to serve as a board member for a not-for-profit organization.
However, you should notify your supervisor first to ensure that these activities
do not create a conflict of interest with your job and that you would not be
participating in decisions regarding Sprint and its services.
QUESTION:
My sister would be a great supplier for Sprint. Can I purchase from her?
<PAGE>
ANSWER:
You can't personally purchase from her or have direct or indirect influence over
purchasing decisions involving her. The potential for an appearance of conflict
of interest is too great. However, if you are totally removed from Sprint's
purchasing decisions in her business area, you may introduce her to the
appropriate person within Sprint.
<PAGE>
QUESTION:
I used to work for a competitor and still own a lot of their stock. Do I have to
sell it?
ANSWER:
If it's more than 3 percent of your investment portfolio, you should consult
with your director to determine if you have a conflict of interest based on your
individual circumstances.
QUESTION:
I noticed that daily minute counts for the network are way up this quarter. May
I purchase Sprint stock based on this information?
ANSWER:
No. Try the reasonable investor test: "Would a reasonable investor consider this
information important in deciding whether to buy or sell the stock?" If the
answer is yes, don't trade until this information is public.
In addition to your obligation to not disclose confidential information to
unauthorized people, you must not use confidential information for personal
gain. [PHOTO]
GIFTS, FAVORS, TRAVEL & ENTERTAINMENT
See "Gifts, Favors, Travel & Entertainment" (pages 19 and 20).
INVESTMENTS AND OTHER FINANCIAL OPPORTUNITIES
A financial investment that compromises your independent judgment or work at
Sprint is a conflict of interest. The term "financial investment" means stock,
options to buy stock or other ownership interests in a company.
Sprint strongly discourages investing in a Sprint competitor. To avoid
impropriety or the appearance of impropriety under The Sprint Principles, you
must notify your director (the term "your director" means a director or above
level person in your direct line of management) in writing if you or a member of
your household already own or plan to acquire a financial investment in any
company that competes with Sprint. Sprint's policy embraces a "rule of reason."
For example, pre-existing small investments or small investments by spouses in
their employers which are competitors may not be a problem. As a general rule, a
small investment is less than 3 percent of your total investment portfolio.
Where your preexisting investment or your spouse's investment in a competitor is
not small, full disclosure to your director is an important first step in
ensuring that your integrity is not questioned and that the issue will be
satisfactorily resolved.
You should not invest in current or prospective Sprint suppliers or companies
with which Sprint is contemplating a transaction, if you are making, or will be
required to make, recommendations or decisions relating to the purchase or
evaluation
<PAGE>
of products, services or the merits of a transaction from that
<PAGE>
particular supplier or company. Likewise, you must immediately report any
situations in which you are offered stock, or included in an Initial Public
Offering (IPO), in companies/suppliers with whom you are conducting
evaluations/business.
If you have any questions as to whether you are in a conflict situation, consult
with your director. Of course, you or your director may call the Helpline for
consultation.
Employees also are prohibited from directly or indirectly buying, leasing or
otherwise acquiring rights to any property or materials if they believe that
Sprint also may be interested in pursuing such opportunity. You should notify
your supervisor of any business opportunity of which you become aware because of
your position with Sprint. Refer to Your Financial Relations to Sprint Suppliers
and/or Competitors for additional guidance.
INSIDE INFORMATION AND SECURITIES TRADING
Insider trading is against the law. You violate the insider trading provisions
of the securities laws if, while in possession of material non-public
information, you engage in a securities transaction and the transaction's value
might be affected were the information publicly known. Information you receive
in your job at Sprint could create exposure to the insider trading laws if you
are not careful with your investments. For example, two types of transactions
might pose this threat: (1) a transaction in Sprint's securities, and (2) a
transaction in securities of another company.
In addition to your investment activities, if you are in possession of inside
information, you can be held liable under insider trading laws if you provide it
to another person and that individual makes a transaction based on such
information or stock tip.
Additionally, you should not engage in investments that give you a financial
interest in poor stock performance by Sprint (which generally is true for "put"
options or "short sells").
OUTSIDE EMPLOYMENT AND ACTIVITIES
Employees may not provide services to any business entity that competes with
Sprint. In addition, Sprint associates may generally not accept compensation for
services performed for Sprint outside of their
regular job.
A conflict of interest also may arise if employees' outside employment
activities impair their timely and effective performance for Sprint.
You must ensure that any outside activity is strictly separated from your Sprint
employment. Doing outside work on Sprint time or using any Sprint resources or
personnel is unacceptable and may lead to disciplinary action, including
termination of employment.
QUESTION:
My brother-in-law sells prepaid calling cards for MCI and AT&T. May I work with
him on weekends outside my job at Sprint to earn extra money?
ANSWER:
This outside activity is a conflict of interest with your position at Sprint.
You should not accept this second job while working at Sprint because this
employment competes with Sprint and
<PAGE>
also provides services or assistance to Sprint's competitors.
QUESTION:
One of my colleagues has a brother-in-law who is a free-lance computer
programmer. Whenever we need some code written, the brother-in-law gets a call
from my colleague and gets the job. I think the brother-in-law does a good job,
but somehow, this doesn't seem right.
ANSWER:
Clearly, your colleague's approach is at a minimum creating an appearance of
impropriety. However, you may not have all the facts. It could be that your
colleague's boss has been fully informed and the boss approves because the
appropriate procurement process has been followed.
If you're comfortable, you should try to discuss this matter with your
colleague. If you are still concerned, talk with your supervisor or call the
Helpline.
<PAGE>
EMPLOYEE RELATIONS
Employees are Sprint's most valued and important resource. To ensure that
employees are able to perform, develop and advance within the company, Sprint
has a dedicated organization, Human Resources, to address employee relations
issues. If you believe your rights have been violated or if you have any other
workplace concerns, you may consult your supervisor first or call your Human
Resources representative directly. If you do not receive a clear explanation or
believe you may not receive a fair or adequate review of the issue from your
supervisor, or Human Resources, call the Helpline.
DISCRIMINATION
We strive to treat each other as we wish to be treated ourselves: with dignity
and respect. We strive to maintain an environment free from discrimination on
the basis of gender, age, race, color, religion, national origin, veteran
status, disability or any other inappropriate basis. We support equal employment
opportunity for all employees and applicants. We will not unlawfully
discriminate in hiring, termination, promotions or any other condition of
employment.
We must treat each other with respect and dignity. [PHOTO]
QUESTION:
I'm a 55 year-old male and was recently passed over for a promotion. I am almost
certain it's because of my age. What should I do?
ANSWER:
You should report the situation to Human Resources or the Helpline.
<PAGE>
Sprint's commitment to diversity can be seen in our Vision, Goals and Values. We
care about the company, work, customers, suppliers and each other. Diversity is
a unique source of the company's energy, strength and excellence.
SEXUAL HARASSMENT AND RELATED ISSUES
Our work environment must be free from intimidation and harassment. Verbal or
physical conduct by any employee who harasses or disrupts another's work
performance or who creates an intimidating, offensive, abusive or hostile work
environment will not be tolerated.
In addition, unwelcome sexual advances, requests for sexual favors and other
unwelcome verbal or physical conduct of a sexual nature are specifically
prohibited. Employees are encouraged to speak out when a co-worker's conduct
makes them uncomfortable. Employees also are responsible for promptly reporting
harassment to Human Resources and/or their supervisor when it occurs. And, you
should report any sexual overtures or sexual harassment of any kind by suppliers
or customers to Human Resources or the Helpline. Refer to Sprint's Sexual
Harassment Policy and Remedy Procedure for further information.
Having a romantic relationship with someone within your reporting chain of
command exposes the company to substantial risk and there-fore is considered
poor judgement. If such a situation develops, the supervisor should work with
his or her management and human resources groups to eliminate the reporting
relationship.
Further, having a romantic relationship with a supplier or customer with whom
you deal at Sprint may also present a problem. If such a relationship develops,
you should notify your supervisor so that another employee may be assigned to
handle the account.
EMPLOYEE PRIVACY
We try to respect each other's privacy. At the same time, Sprint needs to ensure
an efficient work environment.
While Sprint does not routinely monitor personal communications, employees
should have no expectation that these communications are private in the
workplace. Sprint reserves the right to review your internet or e-mail usage for
any reason. Employees also should be aware that there might be times when Sprint
may search employee work spaces.
QUESTION:
When I was on vacation, my supervisor accessed my e-mail system. I had several
personal messages that she may have seen. Does she have the right to access my
e-mail system without my permission?
ANSWER:
Sprint reserves the right to review your e-mail for any reason. Your company
e-mail accounts belong to Sprint and should be used for Sprint business.
QUESTION:
I am an unmarried director in marketing, and I find that I am interested in
dating a manager in my organization. I am
<PAGE>
sure that I can do this without playing favorites. Is it okay?
ANSWER:
You're asking for trouble here. Do not start a romantic relationship with the
manager while he/she is in your organization. Discuss the matter with Human
Resources or call the Helpline.
<PAGE>
Gifts, Favors, Travel and Entertainment
The Sprint Principles help define the boundaries for appropriate business
entertainment. [PHOTO] Gifts, favors, travel and entertainment may create a
conflict of interest with your obligations to Sprint. Therefore, you should
always follow these simple principles: Never accept or provide gifts, favors,
travel or entertainment if they will compromise or appear to compromise your
judgment. And never solicit gifts, favors, travel or entertainment, except for
company authorized causes. The sections below provide more details about these
principles.
GIFTS
Sprint's gift policy embraces a "rule of reason." As a general rule:
. You may accept small gifts valued under $100, such as promotional items (T-
shirts, mugs, baseball caps), given in the regular course of business. However,
you should not accept small gifts on a continual or multiple basis.
. If for business reasons you believe it's important to accept a gift worth more
than $100, the gift should be disclosed to your supervisor and used for a
Sprint business purpose, such as employee recognition.
. Gifts of money or cash equivalents are unacceptable.
QUESTION:
One of our suppliers gave me a nice fruit basket during the holidays. Was it OK
to accept it?
ANSWER:
Accepting small tokens of appreciation is OK, as long as they don't appear to
obligate or influence you or the company. In this case, why not share the fruit
with your colleague?
<PAGE>
. When giving gifts, you should ensure that they are reasonable complements to
our business relationship and do not appear to be attempts to obligate or
influence the recipient.
. Do not offer any gift, favor or entertainment if it is against the policy of
the recipient's organization. Many corporations have business ethics policies
that restrict acceptance of gifts.
. In the case of the government, the offer of a gift may violate the law. And
gifts to foreign government officials may violate the Foreign Corrupt Practices
Act (see p. 23).
. When in doubt, check with your supervisor, the Helpline or the Law Department.
Offering or accepting bribes, kickbacks, payoffs or other unusual or improper
payments to obtain or keep business is unethical, illegal and strictly
forbidden.
FAVORS
You may not accept discounts on personal purchases of a supplier's or customer's
products or services unless such discounts are offered to Sprint employees in
general. You should also never solicit or accept favorable treatment on loans or
other services unless they are broadly available.
TRAVEL & ENTERTAINMENT
Entertainment is often helpful in building and maintaining business
relationships. Sprint employees may accept entertainment that is reasonable in
the context of the business or that advances the company's interests. For
example, accompanying a business contact to a cultural, sporting event or
business meal, or attending a supplier's holiday or celebration function, would
be acceptable in most cases. However, travel and accommodations create more
serious concerns. You should not accept travel or accommodations without the
consent of your supervisor.
Even if the entertainment has a business purpose, accepting travel and lodging
can create the appearance of impropriety. If the trip truly has a business
purpose, perhaps Sprint should pay for it. If the business purpose is minor,
perhaps you should pay your own way.
You may not entertain guests, employees, or customers in establishments focused
on "adult entertainment" (such as strip joints) which are not suited for general
business.
DISCLOSURE
If you're ever in doubt as to how accepting or giving a gift, favor, travel or
entertainment might appear, talk to your supervisor. In addition, if during one
calendar year, you or members of your family accept gifts, favors, travel or
entertainment valued at more than $100 from a single supplier (including travel
or lodging), you must notify your supervisor.
QUESTION:
I was invited to an industry conference sponsored and paid for by one of our
major suppliers. It will be held at a resort in Florida. The purpose of the
conference is to demonstrate the newest line of products and discuss industry
trends. May I attend?
ANSWER:
You should consult your supervisor and carefully
<PAGE>
analyze whether the conference will bring a significant business benefit to
Sprint. If the answer is yes, you must obtain authorization to attend from your
supervisor. Generally, Sprint should pay expenses associated with travel and
accommodations.
QUESTION:
One of my customers owns a travel agency and offered my family and me free
travel upgrades for our vacation, including air travel and hotel. These upgrades
are available to all Sprint employees. Is it okay for me to accept them?
ANSWER:
Yes. You may accept these upgrades because they are broadly available to Sprint
employees.
<PAGE>
Government Customers
All relations with government agencies, officials and employees must be
conducted with integrity and honesty. [PHOTO]
Sprint's policy is to treat all our customers, including the U.S., state and
local governments, with the honesty, fairness and quality described in The
Sprint Principles. Additionally, we comply with the various procurement laws and
regulations that have been established to protect the public interest. These
laws are applicable to Sprint whether the work is being done under a prime
contract or a subcontract.
Sprint employees who deal with government officials and contracts are
responsible for knowing and complying with applicable law and regulations.
Questions concerning doing business with the government should be directed to
the Law Department.
QUESTION:
Sprint is bidding on a state contract. We had several meetings with state
officials that extended through the lunch hour. Is it okay to treat them to
lunch?
ANSWER:
No. We should not do anything that may improperly influence, or appear to
improperly influence, the bidding process. To avoid the appearance of a
conflict, you should each pay your own way.
<PAGE>
QUESTION:
I received a request for boycott-related information. Is it okay to respond to
the request as long I report the situation to the Law Department?
ANSWER:
No. If you receive any communication that can be interpreted as a request for
boycott-related information, you must immediately report the situation to the
Law Department. No further action may be taken without specific authorization
from the Law Department.
International Business Practices
Sprint employees around the world are expected to live up to The Sprint
Principles. That means complying with Sprint policies as well as local laws.
Some U.S. laws apply to Sprint's non-U.S. operations. Some of the chief areas
where U.S. law applies internationally are summarized below. Fortunately, these
laws rarely conflict with the laws of other countries. Any employee involved in
international business transactions should contact the Helpline to obtain a copy
of Sprint's Policy for Conducting International Business.
ACCOUNTING
Sprint's status as a publicly held corporation requires it to conform to
generally accepted accounting principles in all operations worldwide. Sprint
financial policies reflect these principles. All payments, transactions and
accounts worldwide must be accurately and truthfully recorded and reported.
ANTI-BOYCOTT
Sprint employees and agents may not by law cooperate in any way with an
unsanctioned foreign boycott of countries friendly to the U.S. The largest
international boycott today is that of Israel and the related blacklist of
companies doing business with Israel by certain Arab countries. Any request for
information or action that seems to be related to this or any other illegal
boycott should be immediately forwarded to the Law Department.
EXPORT CONTROL
Several U.S. laws restrict trade with certain countries. Other laws restrict
export of certain technologies, especially in the areas of encryption and
advanced computing devices. Sprint operations worldwide must comply with U.S.
export restrictions. Employees and agents who are uncertain of the legal trade
status of any country or technology for export must contact the Law Department.
<PAGE>
FOREIGN CORRUPT PRACTICES ACT
The Foreign Corrupt Practices Act (FCPA) prohibits Sprint from directly or
indirectly offering, promising to pay or authorizing the payment of money or
anything of value to foreign government officials, parties or candidates for the
purpose of influencing the acts or decisions of foreign officials. Certain minor
payments to foreign government officials, made to expedite or secure the
performance of "routine governmental action," may not violate U.S. law. Consult
with the Law Department before making or authorizing any payment of this type.
REGULATORY COMPLIANCE GUIDELINES
As part of the investment in Sprint by France Telecom and Deutsche Telekom (FT
and DT) and the formation of the Global One joint venture, Sprint was required
to obtain several approvals by the U.S. and European regulatory authorities.
These regulatory approvals were structured to ensure nondiscriminatory conduct
in business dealings between FT and Sprint or between DT and Sprint. They also
contain restrictions, policies and ethical considerations related to
international business dealings with other foreign entities. Therefore, any
Sprint employee who is involved in international business transactions should
contact the Helpline at 1/800-788-7844 to take the on-line computer training and
to obtain a copy of the Regulatory Compliance Guidelines.
While Sprint must adapt
to business customs and
market practices in
global markets, all
employees worldwide
should adhere to
applicable U.S. laws [PHOTO]
and regulations and
The Sprint Principles.
Every employee dealing
in international
transactions should also
respect the laws
applicable to the
host company.
QUESTION:
Under export control regulations, are exports limited to physically shipping
something (a piece of equipment, blueprint or software code) outside the U.S.?
ANSWER:
No. Exports are not limited to physically shipping some-thing. Electronic
transmissions overseas (including to an affiliate) or even verbal discussions
with foreign nationals inside or outside the U.S. are exports.
QUESTION:
I know it's against U.S. law to make payments to foreign
<PAGE>
officials, but everybody tells me that it's the only way to get things done in
this country. Can't I get around this by hiring an agent who will pay the
officials a commission?
ANSWER:
No. It's against the law. Plus, the consequences of getting caught for you and
Sprint could be severe. You can't get around your legal responsibilities by
hiring agents to do what you can't. If you are having difficulties getting
appropriate action in a foreign country, consult with the Law and External
Affairs Departments.
<PAGE>
QUESTION:
I'm running for city council. There's no problem with that, is there?
ANSWER:
No, as long as your activities for the city council do not interfere with you
satisfactorily performing your duties as a Sprint employee. If elected, you
should inform your supervisor and External Affairs. If your community is ever
involved in negotiations with Sprint, for example, over placement of an antenna,
you'll need to excuse your-self from voting. And, of course, make it clear that
you represent yourself and your constituents, not Sprint.
Political/Community Activities
COMMUNITY SUPPORT
Sprint has contributed to the economic and social development of its communities
for 100 years. In addition to the jobs created and services provided, the
company encourages employees and business units to become actively involved in
the life of their communities. The Sprint Foundation and Sprint employees
provide financial support to thousands of worthwhile community programs in
education, health, social welfare and culture. The community leadership offered
by thousands of Sprint employees around the world is another example of long-
standing civic commitment.
PERSONAL COMMUNITY ACTIVITIES
Employees are encouraged to participate in community activities. In the conduct
of their personal affairs, employees must make it clear that their views and
actions are their own, and not those of Sprint. Employees should ensure that
their outside activities do not interfere with job performance.
Employees wishing to use company time or property to support charitable, non-
political efforts first must obtain the approval of their supervisor.
POLITICAL ACTIVITIES
No employee may make any contribution on behalf of Sprint or use Sprint's name,
funds, personnel, property or services for the support of political parties or
candidates unless the contribution is permitted by law and authorized in advance
by the company's Chief External Affairs or Government Relations Officer.
No one in the company may pressure another employee to express a political view
that is contrary to a personal view, or to contribute to a political action
committee, political party or candidate, or charitable organization.
U.S. law and the laws of many state and local governments forbid companies from
making contributions of money, goods or services to political candidates, except
for administrative support of SprintPAC. SprintPAC is a Political Action
Committee formed and operated by participating Sprint employees. SprintPAC does
not contribute company funds. Outside the U.S., Sprint will honor local laws and
<PAGE>
applicable U.S. laws, including the Foreign Corrupt Practices Act. (See Sprint's
Policy for Conducting International Business.)
QUESTION:
May I participate in a campaign to raise money for the American Cancer Society?
ANSWER:
Yes. Sprint encourages you to participate in charitable activities as long as
these activities do not interfere with your job performance and you adhere to
Sprint's nonsolicitation policy. Also, remember to first obtain approval from
your supervisor if you wish to use company time or property.
<PAGE>
Sprint believes in
doing business with
customers, suppliers
and other third parties [PHOTO]
who demonstrate
high principles of
ethical behavior.
Procurement Practices
Sprint believes in doing business with those suppliers, contractors, alliance
partners, agents, sales representatives and consultants who embrace and
demonstrate high principles of ethical business behavior. Therefore, Sprint will
not knowingly use suppliers who operate in violation of applicable laws or
regulations, including environmental, employment or safety laws. As part of
their contract, all persons or companies engaging in business relationships with
Sprint must receive a copy of The Sprint Principles and agree to abide by its
applicable provisions.
Procurement decisions should be based on obtaining the best over-all value for
Sprint. Obtaining competitive bids, verifying quality and service claims, and
confirming the financial and legal condition of the supplier are all important
steps in a good procurement decision.
Agreements should be written to clearly identify the services or products to be
provided, the basis for earning payment and the applicable rate or fee. The
amount must not be excessive in light of industry practice and must be
commensurate with the services or products provided. Do not make any commitments
or enter into any oral or written agreement on behalf of the company unless you
have fiscal and signatory authority to do so and unless you know that Sprint or
the other party can comply with the terms of that agreement.
Personal, family and financial relationships may make it difficult to make
objective decisions. An employee who has personal or family relationships with,
or who owns any interest in a supplier, customer, potential supplier or
candidate, should disclose this relationship to management and take appropriate
steps to ensure that decisions affecting these companies are based solely on
objective input and judgment.
QUESTION:
A Sprint supplier advised me off-line that he preferred not to work with
minorities. We have several minorities assigned to this supplier relationship.
What should I do?
ANSWER:
Advise this supplier that this is against Sprint's policy on discrimination and
that suppliers are required to live up to The Sprint Principles. If this
behavior continues to be a problem, advise your supervisor or the Helpline
<PAGE>
Property Rights of Others
Question:
I received a subpoena requesting the telephone records of a Sprint customer.
Is it okay to send these records since a court subpoena was sent?
Answer:
No. All subpoenas for a customer's telephone records should be forwarded to the
Corporate Security Department for handling.
COMPETITIVE INFORMATION
Information about competitors, customers and suppliers is a valuable asset in
the highly competitive communications market. Illegal or unethical means to
gather competitive information are prohibited.
Sprint's policy is to honor copyrights, and to respect the trade secrets of
others. You should not engage in unauthorized copying or reveal or use any trade
secrets of a former employer or other competitor in connection with your Sprint
employment, including competitor information such as customer lists, technical
developments or operational data.
If information that might constitute a trade secret or proprietary information
of another company is obtained by mistake, consult the Law Department or the
Helpline immediately.
CUSTOMER PRIVACY
Among the many things customers count on is protection of their privacy.
Customer information and records must be accessed or used only for authorized
business purposes.
Customer communications -- including voice and data -- are confidential and must
never be tampered with, recorded, listened to or divulged without written
customer approval or when required by law.
Although privacy is important and protected by law, if you suspect a customer is
using Sprint's services for an unlawful purpose, such as to defraud someone,
please contact your Law Department immediately.
Any subpoena, court order or other request for customer information from law
enforcement, government agencies or other outside parties should be referred
immediately to the Law Department (913-624-6843).
Subpoenas for customer toll records should be forwarded immediately to Corporate
Security (1/800-877-7330).
QUESTION:
One of my peers who used to work for MCI gave me a copy of an MCI marketing
proposal that he said he brought with him when he left. This information would
benefit our group in developing a similar type of proposal. Is it okay to use
this information?
ANSWER:
No. Competitors' marketing proposals may be proprietary information. The new
employee
<PAGE>
should not have brought this material to Sprint unless it was already public
knowledge. Using this information would violate The Sprint Principles and might
lead to a lawsuit. Immediately advise your supervisor, the Law Department or the
Helpline so that they can counsel this employee on Sprint's Protection of
Proprietary Information Policy and promptly and properly return or destroy this
information.
You must never
attempt to acquire a
competitor's trade
secret or other [PHOTO]
proprietary
information through
unlawful means.
<PAGE>
Safety, Health and Environment
DRUGS AND ALCOHOL
Employees deserve to work in a safe and healthy environment.
Customers and investors demand quality and productivity. Sprint, therefore,
requires each employee to work free from the influence of any substance,
including alcohol, that could prevent him or her from conducting work activities
safely and effectively. Employees who are using prescription or non-prescription
drugs that may impair alertness or judgment, and therefore jeopardize their
safety and that of their co-workers, should inform their supervisor.
To support these objectives, Sprint requires a drug-free workplace. Using,
possessing, distributing or being under the influence of alcohol, or an illegal
or illicit drug, while on duty, on company premises or in company vehicles is
prohibited. Employees with problems related to alcohol or drugs are encouraged
to seek assistance from the Employee Assistance Program or other qualified
professionals.
ENVIRONMENT
Sprint has always been committed to minimizing any adverse impact on the
environment, but carrying out that commitment is impossible without your
awareness and cooperation.
You can help in several ways:
. Recycle materials whenever it is practical to do so;
. Let your supervisor know immediately if you're aware of any improperly handled
hazardous materials; also talk to your supervisor if you are aware of other
significant environmental issues that may be in violation of federal
regulations;
. When you have questions or concerns, please refer to the Environmental
Guidelines for information.
QUESTION:
I frequently have to drive from place to place to conduct Sprint business.
Sometimes at lunch I'll have several beers, and it's never had any effect on me.
There's no problem here, right?
ANSWER:
Wrong. Alcohol is proven to impair judgement and driving ability. The Sprint
Principles stresses that you have to be able to work "safely and effectively."
Drinking and driving are hazardous to your life and to your career at Sprint.
For more information, consult Sprint's Substance Abuse Policy.
QUESTION:
I'm a supervisor, and one of my employees told me a co-worker threatened to harm
him. How do I handle reports of violence?
ANSWER:
<PAGE>
Call Corporate Security (1/800-877-7330) and/or Human Resources immediately.
(Call the police if you believe there may be an immediate danger.)
<PAGE>
QUESTION:
What if test results make our product look bad?
ANSWER:
Under no circumstances should you alter test results to make a product look
good.
Set up and perform every test according to approved, written procedures, and
then report the actual test results accurately.
QUALITY AND SERVICE
Sprint's goal is to satisfy its customers with the highest-quality products and
services at competitive prices. You satisfy customers when you treat them as you
would like to be treated. That means you need to continue treating customers
with honesty, fairness and respect, and you should make promises only when you
are reasonably confident that you will be able to keep them.
In order to deliver quality and to protect the Sprint name, compliance with
quality control specifications and safety or testing requirements is essential.
Failure to conduct required testing or misrepresentation of test procedures or
data are a violations of Sprint policy.
SAFETY AND HEALTH
Sprint desires to provide a safe and healthful workplace for employees or
visitors to its premises. To support this commitment, employees are responsible
for observing the safety and health rules, practices and laws that apply to
their jobs, and for taking precautions necessary to protect themselves, their
co-workers and visitors. Employees are also responsible for immediately
reporting accidents, injuries, or occupational illnesses and unsafe practices or
conditions to their supervisor.
Employees may not carry any weapon on the job, onto company premises, in company
vehicles or while attending Sprint-sponsored activities. Threats or acts of
violence or physical intimidation are strictly prohibited. Sprint will take
appropriate and timely action to correct known unsafe conditions.
QUESTION:
I noticed an employee who was changing the oil from his vehicle during the
weekend on company property and dumping the oil in the weeds near the lot line.
I'm new to Sprint, however, and I don't want to rock the boat when I'm just
getting started. And, he really isn't in my work group.
Isn't the safest course just to ignore the incident?
ANSWER:
The environment is everyone's area. This is true even for new employees! What
you observed may be hazardous to the environment, Sprint or employees in your
location. Therefore, it must be
<PAGE>
reported to your supervisor or the Helpline and investigated at once.
Retaliation against anyone making a report such as yours will not be tolerated.
If you believe you have experienced retaliation, contact the Helpline
immediately.
The quality and safety of our products and services are essential. [PHOTO
<PAGE>
QUESTION: I work in sales, and I have to compete everyday with people from other
companies who play fast and loose with service capabilities and pricing. I feel
like I have to do the same thing in order to compete. This is all part of the
game, isn't it?
ANSWER:
Business isn't really a game--it's about real companies and real people, people
just like us. We make money from long-term customers -- customers who are
satisfied that we have fulfilled our commitments to them.
You and Sprint will build a better company through referrals and continued
business from satisfied customers than from a deceptive sale that blows up
later.
In our highly competitive marketplace, Sprint can create a competitive advantage
by accurately representing products, services, benefits and prices. Anytime we
make a promise we can't keep, some hard-earned customer trust is lost. Avoid
creating misleading impressions, omitting important facts or making false claims
about competitors' offerings. While Sprint needs to aggressively market and
advertise its products and services, we must do so within the confines of
applicable "truth in advertising" laws. No illegal or unethical activity to
obtain business, including offering bribes or kickbacks, is ever acceptable.
In addition, if you believe that a customer is using our service for an unlawful
purpose, such as to defraud, we may have an obligation to terminate that
customer's service. This is particularly true if we are providing unregulated
billing and collection or other optional services.
If you suspect a customer is using Sprint's services for an unlawful purpose,
please contact the Law Department or the Helpline immediately.
Brand is enhanced by fair and honest marketing practices. [PHOTO]
<PAGE>
Additional Resources
In addition to the The Sprint Principles, we have many other resources to turn
to if the best course of action is unclear.
PEOPLE
Corporate Security -- 1/800-877-7330 (Available 7 days a week, 24 hours a day)
Employee Benefits Assistance Center -- 1/800-697-6000
Employee Certification Line -- 1/800-337-9073
Helpline -- 1/800-788-7844
Human Resources
Law Department -- 913/624-6843
Manager
Supervisor
RESOURCES
Corporate Security Policy -- http://144.223.14.204/security/19e.html
Corporate Trademarks -- http://144.223.26.103/law/trademark
Employee Resource -- http://hr/erg/erg.htm
Environmental Guidelines -- Contact the Law Department at 913/624-6843)
Ethics/Compliance -- http://144.223.26.103/law/gbt/html/etcom.html
Intellectual Property -- http://144.223.26.103/law/gbt/html/iprop.html
Law Department Intranet Site -- http://144.223.26.103/law
Protection of Proprietary Information Policy and Practices -- http://144.
223.14.204/security/19e.html
Records Retention Policy -- http://kddmsp01/brg/kcretent.htm
Regulatory Compliance Guidelines -- http://144.223.26.103/law/ gbt/regulatory/
Sprint's Sexual Harassment Policy and Remedy Procedure --
http://pinpoint/brg/pdf/A-FM26-0354.PDF
Sprint's Policy for Conducting International Business -- http://144.223.
26.103/law/gbt/html/inter.html
The Sprint Principles of Business Conduct -- http://144.223.184.
184/ethics/ethictoc.htm
Sprint Intranet Web Site
The information provided and the procedures set forth in this publication are
guidelines. Sprint may revise, delete or supplement any practice, policy or
procedure related to the guidelines provided in this publication at any time at
its sole discretion.
<PAGE>
Index
A
Accounting ..................................................... 8, 22
Accuracy of Company Records .................................... 8
Additional Resources............................................30
Alcohol ........................................................27
Anti-boycott ...................................................22
Antitrust ......................................................12
B
Board Memberships ..............................................14
Bribes .........................................................20
C
Certification Process (1/800-337-9073) ......................... 6, 32
Chairman's Letter .............................................. 1
Community Activities ...........................................24
Communications with Sprint's Attorneys .........................10
Company Assets: Protection and Use ............................. 9
Competition ....................................................12
Competitive Information ........................................26
Computer and Network Security ..................................10
Community Support ..............................................24
Conflicts of Interest ..........................................14
Creating and Retaining Business Communications .................11
Customer Privacy ...............................................26
D
Disclosure .....................................................14, 20
Discrimination .................................................17
Drugs and Alcohol ..............................................27
E
Employee Privacy ...............................................18
Employee Relations .............................................17
Environment ....................................................27
Ethics Quick Test .............................................. 4
Export Control .................................................22
F
Family Members .................................................14
Favors .........................................................20
Foreign Corrupt Practices Act ..................................23
G
Gifts ..........................................................19
Gifts, Favors, Travel & Entertainment ..........................19
Government Customers ...........................................21
H
Helpline (1/800-788-7844) ...................................... 7
History and the Future ......................................... 5
I
Inquiries from the Government or Media .........................10
<PAGE>
Inquiry Process ................................................ 7
Inside Information and Securities Trading ......................16
International Business Practices ...............................22
Introduction ................................................... 5
Investments and Other Financial Opportunities ..................15
K
Kickbacks ......................................................20
M
Managers Have an Additional Responsibility ..................... 6
Marketing ......................................................29
O
Obligation to Report ........................................... 7
Outside Employment & Activities ................................16
P
Political Activities ...........................................24
Political/Community Activities .................................24
Procurement Practices ..........................................25
Property Rights of Others ......................................26
Protecting Company Assets ...................................... 9
Proprietary Information ........................................ 9
Purpose of The Sprint Principles ............................... 5
Index
Q
Quality and Service ............................................28
R
Regulatory Compliance Guidelines ...............................23
Retaliation and False Reports .7 Reporting a Violation (Refer
to Helpline) .................................................. 7
S
Safety, Health and Environment .................................27, 28
Sales and Marketing ............................................29
Sexual Harassment and Related Issues ...........................18
T
Trademarks and the Sprint Name .................................10
Travel and Entertainment .......................................20
V
Violations and Their Consequences .............................. 5
Vision, Goals and Values ....................................... 3
Sprint Ethics Office
8140 Ward Parkway
Kansas City, MO 64114
913-624-6225
<PAGE>
(Reverse charges to this number if outside the U.S.)
Copyright 1998 Sprint
All rights reserved Printed on recycled paper
<PAGE>
Thank you for reading The Sprint Principles of Business Conduct.
Now would be a great time to call the Certification Line, 1/800-337-9073, to
affirm your commitment to The Sprint Principles.
If you have any questions or concerns about how The Sprint Principles impacts
your personal situation, please talk to your supervisor, Human Resources, or the
confidential Helpline at 1/800-788-7844.
<PAGE>
Page 1 of 3
[LOGO OF SPRINT]
Attachment D
TRANSPORTATION ROUTING GUIDE
----------------------------
ROUTING: The carriers listed below shall be used for the inbound and outbound
- --------
movement of materials to, from, and between Sprint Corporation locations and
suppliers.
BILLING: All freight charges which are directly, or indirectly, the
- --------
responsibility of Sprint, Sprint International, Sprint Services and Sprint
Telemedia should be billed third party to Sprint Accounts Payable, P.O. Box
5409, Kansas City, MO 64131. Purchase of insurance coverage from
transportation carriers is NOT authorized.
---
DOCUMENTATION: All shipping documents should reference Purchase Order, Work
- -------------
Order, or Cost Center number. International paperwork should be verified by
Sprint's Transportation Department prior to shipment.
COMPLIANCE: Failure to comply with Sprint's Transportation Routing Guide
- -----------
instructions will result in excess freight chargebacks to your company.
Shipments routed by means other than the guidelines within will be charged back
to the supplier at 50% of the total transportation cost. Penalties will be
enforced on all shipments beginning May 1, 1995.
SPRINT TRANSPORTATION: Please refer any questions to Sprint's Transportation
- ----------------------
Department at the following numbers: Tom Conrow (816/854-5327) or Zoe Morgan
(816/854-5339).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SMALL PACKAGE SURFACE ROUTING UNDER 150 LBS. TOTAL
(Including to and from Canada)
AUTOMATED RECEIVING LOCATIONS:
If shipments meet UPS guidelines and the materials are going to one of the receiving locations below, see UPS Consignee Billing:
---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
23759 Eichler St. 2-J Hayward California 94545 11701 W. 85th St. Lenexa Kansas 66215
3065 Gold Camp Rancho Cordova California 95670 650 Fee Fee Rd. Maryland Heights Missouri 63043
1099 18th St. Denver Colorado 80202 8140 Ward Pkwy. Kansas City Missouri 64114
3100 Cumberland Cr. Atlanta Georgia 30339 901/903 E. 104th St. Kansas City Missouri 64131
5600 N. River Rd. Rosemont Illinois 60018 1200 Main St. Kansas City Missouri 64152
8725 Higgins Rd. Chicago Illinois 60631 29 Stults Rd. Dayton New Jersey 08810
2330 Shawnee Msn. Westwood Kansas 66205 1 Manhattanville Rd. Purchase New York 10577
6600 College Blvd. Overland Park Kansas 66211 1520 E. Rochelle Irving Texas 75039
9350 Metcalf Overland Park Kansas 66212 14012 Welch Rd. Farmers Branch Texas 75244
9095 Bond St. Overland Park Kansas 66214 12490 Sunrise Valley Reston Virginia 22096
UPS CONSIGNEE BILLING:
1. Inbound materials to the above locations should be routed via UPS 4. Sprint's six digit cost center number must be on
Cosignee Billing. each package's address label. This number can be
found on the Express Buy Order Form or on the
distribution account line of the Purchase Order.
2. If your company is not set up to ship via Consignee Billing, please Example: Dist. Acct.: 01USS 01 (XXXXXX)
contact UPS at 800/354-7527 to request a Consignee Billing Kit. 61200000 0000
5. These packages will be picked up with your
regularly scheduled UPS pickup. No additional
pickups are required.
3. Each individual package must meet UPS size and weight restrictions:
. 150 pounds maximum weight per pkg. UPS Consignee Billing Desk 800/354-7527
. 130 inches combined length & girth
. 108 inches maximum length
----------------------------------------------------------------------------------------------------------------------------
SMALL PACKAGES FOR OTHER RECEIVING LOCATIONS:
1. If the receiving location on the purchase order is NOT listed above, 2. ROADWAY PACKAGE SYSTEM or UNITED PARCEL SERVICE
---
shipping charges should be added to the invoice for goods listed on the may be used for shipments to locations NOT listed
Purchase Order. above. ---
ROUTE SHIPMENTS WHICH TOTAL 151 POUNDS OR GREATER VIA LTL CARRIERS
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Page 2 of 3
[LOGO OF SPRINT]
TRANSPORTATION ROUTING GUIDE
----------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LTL SURFACE ROUTING OVER 150 LBS. TOTAL
(Including to and from Canada - Region map below)
Shipments above 10,000 lbs. require authorization by Sprint's Transportation Department prior to shipment
<S> <C> <C>
NATIONWIDE LONG HAUL LTL CARRIERS: Consolidated Freightways, Yellow Freight System
REGIONAL SHORT HAUL LTL CARRIERS:
- -----------------------------------------------------------------------------------------------------------------------------------
NORTHWEST MIDWEST NORTHEAST
--------- ------- ---------
Silver Eagle Central Transport Howard Express
Viking Freight Con-Way Midwest TNT Red Star
Hyman Freightways Preston Trucking
- -----------------------------------------------------------------------------------------------------------------------------------
WEST SOUTHWEST SOUTHEAST
--- --------- ---------
Viking Freight American Freightways AAA Cooper
Con-Way Western Con-Way Southern Express Averitt Express
Southeastern Freightways
Con-Way Southern Express
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Regional LTL (Less-than-truckload) shipments are defined as short haul
interstate LTL movements, normally under 500 miles which occur either within a
region, or between a region and the bordering states of a neighboring region or
bordering Canadian Provinces.
DEFINED REGIONS FOR LTL FREIGHT
-------------------------------
[MAP APPEARS HERE}
================================================================================
ELECTRONIC (PADDED) VAN SHIPMENTS
BEKINS VAN LINES (ALL POINTS) 816/763-6300 800/767-1120
NORTH AMERICAN VAN LINES (BELTMANN) 913/888-9105 800/869-6114
UNITED VAN LINES (FRY-WAGNER) 913/541-0020 800/829-0049
================================================================================
<PAGE>
Page 3 of 3
<TABLE>
<CAPTION>
DOMESTIC AIR EXPRESS AND AIR FREIGHT ROUTING
(See Geographic Routing Exceptions for Canada, Alaska, Hawaii, Puerto Rico and International Shipments)
Shipments above 1,000 lbs. require authorization by Sprint Transportation prior to shipment
- ----------------------------------------------------------------------------------------------------------------------------
WEIGHT SAME DAY NEXT DAY 2ND DAY 3-5 DAYS INTERNATIONAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIRBORNE EXPRESS
LTR - 50 FEDEX
QUICK UPS GROUND AIRBORNE EXPRESS
- -------------- --------------------------------------
COURIER DHL WORLDWIDE*
51 - 70 EMERY EMERY
WORLDWIDE WORLDWIDE
- --------------- ------------------------------------------------
CALL TRANSPORTATION
71+ BURLINGTON BURLINGTON FOR INTERNATIONAL
V AMERTRANZ (formerly Amerford) ROUTING GUIDE
PILOT AIR FREIGHT -------------
AND INSTRUCTIONS
- ----------------------------------------------------------------------------------------------------------------------------
Air routing is only authorized when expedited service is requested by negotiator to meet specific delivery requirements.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC EXCEPTIONS (SURFACE & AIR)
(Inbound and Outbound)
- ----------------------------------------------------------------------------------------------------------------------------
CANADA CANADA ALASKA & HAWAII PUERTO
WEIGHT (Air) (Surface) RICO
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LETTER AIRBORNE AIRBORNE EXPRESS*
- DHL WORLDWIDE UPS GROUND FEDEX
70 FEDEX
- --------------------------------------------------------------------------------------------------------------------------
71+ EMERY WORLDWIDE CONSOLIDATED FREIGHTWAYS BURLINGTON AMERTRANZ (Amerford)
BURLINGTON YELLOW FREIGHT SYSTEM AMERTRANZ BURLINGTON
- --------------------------------------------------------------------------------------------------------------------------
*Preferred Carrier for specific service requirement
--------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CONTACT INFORMATION
CARRIER CUSTOMER SERVICE CONTACT
<S> <C>
Airborne Express 800/AIRBORNE
AmerTranz Worldwide (formerly Amerford) Contact local station
Bekins Van Lines 800/767-1120 or 816/763-6300, Customer Service
DHL Worldwide Express 800/345-3601, Monika Hayworth (Preferred Accounts)
Emery Worldwide 800/HI-EMERY, Preferred Accounts Desk
FedEx (Federal Express) 800/238-5355
LTL Carriers Contact local terminal - customer service/dispatch
North American Van Lines 800/869-6114 or 913/888-9105, Sandi Davis
Pilot Air Freight 800/HI-PILOT or local station
Quick International Courier 800/488-4400, extension 475
Burlington Contact local station
Sprint Transportation Dept. 816/854-5339 (Zoe Morgan), 816/854-5327 (Tom Conrow)
United Van Lines 800/829-0049 or 913/541-0020, Mike Wagner
UPS Consignee Billing 800/354-7527
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.9
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE PORTIONS OF THE
AGREEMENT INDICATED WITH AN ASTERISK (*). A COMPLETE COPY OF THIS AGREEMENT,
INCLUDING THE REDACTED TERMS, HAS BEEN SEPARATELY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
OBJECTIVE SYSTEMS INTEGRATORS, INC.
LICENSE AGREEMENT
CONTRACT No.: 325
THIS MASTER AGREEMENT ("Agreement") is entered into as of March 28, 2000
("Effective Date"), between OBJECTIVE SYSTEMS INTEGRATORS, INC. ("OSI"), and
VoiceStream Wireless Corporation. ("Licensee").
1. DEFINITIONS
-----------
(a) Application Component. OSI Software, other than NetExpert VSM Core
---------------------
Products, licensed as a single off-the-shelf application component such
as FM Exel(TM), including only those off-the-shelf Rulesets provided as
part of that application component.
(b) Combined Software. Computer code, modules, programs, data files or
-----------------
rules, including related documentation, resulting from (1) some or all
of the same being linked, combined or otherwise operated with OSI
Software, or (2) Licensee's modification of OSI Software.
(c) Deliverables. Materials such as OSI Software and Manuals specifically
------------
described as deliverables in a Statement of Work.
(d) Information. Written, machine-reproducible and visual materials that
-----------
are described in this Agreement, or are clearly marked when disclosed,
as being confidential, together with all written, visual and oral
materials so identified in writing within 30 days after their
disclosure.
(e) Installation Date. The business day OSI declares Products ready for use
-----------------
if installed by OSI, or the business day after Products are delivered,
if they are to be installed by Licensee.
(f) Licensee Software. Computer code, modules, programs, data files or
-----------------
rules, including related documentation, owned or licensed by a third
party to Licensee and designed to be linked, combined or otherwise
operated with OSI Software to augment or enhance it. Licensee Software
excludes Products.
(g) Manuals. User manuals and similar documentation listed in an Order or
-------
supplied with OSI Software or Vendor Software. Manuals do not include
product and service descriptions, advertising or marketing materials.
(h) NetExpert Framework Product. OSI Software specifically listed in the
---------------------------
Price List as part of the NetExpert(R) network management Framework.
(i) New Use. Use of OSI or Vendor Software:
-------
(1) Other than as specifically provided by this Agreement.
(j) Order. The form attached as Exhibit 1, as from time to time submitted
-----
by Licensee and accepted by OSI to acquire licenses for Products under
the terms of this Agreement. If the terms of an accepted Order directly
conflict with the terms of this Agreement (including, without
limitation, the form attached as Exhibit 1, the terms of the accepted
Order will govern.
(k) OSI Software. Computer code, modules, programs, data files and rules
------------
listed as OSI Software in the Price List, or provided to Licensee by OSI
as Deliverables or otherwise in connection with Services or otherwise.
OSI Software does not include Vendor Software.
(l) Price List. The OSI price list in effect on the date an Order is
----------
accepted and approved for use in the region where the Products are to be
installed. Subject to the restrictions set forth herein or otherwise
agreed upon in writing by the parties, OSI may change the Price List,
including available Products, specifications and prices, on notice to
Licensee.
(m) Products. OSI Software, other Deliverables, Vendor Software and
--------
Manuals.
(n) Professional Services. The Services described in a Statement of Work.
---------------------
<PAGE>
(o) Ruleset. A group of instructions which, when taken as a whole,
-------
constitute a decision-making matrix used to direct the functions of
NetExpert Framework Products for a specific network element, management
operation or other application.
(p) Services. Professional Services and Support Services.
--------
(q) Statement of Work. A description of Professional Services attached to a
-----------------
Work Order which is made a part of this Agreement.
(r) Support Services. The update and support services described in Exhibit
----------------
2.
(s) Vendor. A third party which directly or indirectly provides software
------
embedded in OSI Software or Vendor Software.
(t) Vendor Software. Computer code, modules, programs, data files or rules
---------------
listed as Vendor Software on the Price List or provided to Licensee by
OSI as separately packaged software in connection with Services or
otherwise.
(u) Work Order. A document executed by the parties which sets forth the
----------
terms upon which Professional Services will be provided by OSI to
Licensee, including the Statement of Work. If the terms of a Work Order
directly conflict with the terms of this Agreement, the terms of the
Work Order will govern.
2. ORDER, PRICE, PAYMENT
---------------------
(a) Orders. Licensee will use the Order attached as Exhibit 1 to order OSI
------
Software, professional services and maintenance and support services.
Licensee has the option to use or not use OSI's professional services.
If Licensee elects to order professional services from OSI during the
life of this Agreement, it will use the form of Order illustrated at
Exhibit 1.
(b) Price. For the Order identified above, Licensee agrees to pay to OSI
-----
the price stated at Exhibit 1 for the OSI software encompassed by this
Agreement. Exhibit 1 includes the price for professional services should
Licensee elect to purchase professional services from OSI.. Professional
Services charges will be billed according to the applicable Work Order,
or if not otherwise specified, then according to OSI's then-current time
and materials rates, minimums and other terms. If a Work Order is priced
on a time and materials basis with a not-to-exceed amount, OSI will use
all reasonable efforts to complete the work described in the Work Order
for that amount, and OSI will provide advance notice to Licensee if that
work will not be completed for that amount. On receipt of that notice,
Licensee may determine whether to continue the work or to accept the
work in its then-current form and terminate further work under that Work
Order. Support Services will be billed at the then-current rates.
(c) Due Date. Except as set forth in an Order or a Work Order, Licensee
--------
will be invoiced for payment no earlier than the Acceptance date as
specified in Section 6(b). Except as set forth in an Order or Work
Order, payment is due (*) days after the invoice date. Charges incurred
on a monthly or other periodic basis are payable in advance on the first
day of the applicable period unless otherwise agreed in an Order.
(d) Payments. Payments for OSI products and services will be made in
--------
immediately available U.S. funds, without withholding for Taxes or other
amounts. Amounts not paid within (*) days of when due will accrue
interest at the lesser of (*) per month or the highest rate permitted
by applicable law. Licensee will reimburse OSI for all fees, costs and
expenses (including reasonable attorneys' fees and court costs) incurred
to collect undisputed but unpaid amounts.Amounts invoiced to VoiceStream
by OSI become final unless disputed in writing within thirty (30) days
after the date of OSI's invoice. The "undisputed" portion of an OSI
invoice is the portion excluded from a written statement from
VoiceStream to OSI stating any disputed amount of an OSI invoice.
VoiceStream's written statement of the amount disputed must be itemized
with specificity so that OSI can understand the nature of the dispute on
the face of the statement of dispute ("statement of amount disputed").
VoiceStream's statement of amount disputed must be provided to OSI prior
to the due date for payment of the OSI invoice to which the statement of
amount disputed relates. If VoiceStream fails to provide the statement
of amount disputed by the deadline described in this Section 2(d),
VoiceStream waives any claim of any disputed amount related to the
invoice.
(e) Taxes, Charges. Prices are exclusive of, and Licensee will pay, all
--------------
sales, value-added, withholding or excise taxes, import duties and other
government fees and charges of any nature whatsoever other than taxes
<PAGE>
on the income of OSI ("Taxes"). Taxes paid or payable by OSI will be
invoiced to and paid by Licensee. If Licensee is obliged to make any Tax
or other withholding on or in relation to any payment due OSI under this
Agreement, the amount due will be deemed to be that which, having been
grossed-up and the applicable tax having been withheld, will yield OSI
the same amount as it would have received had no Tax withholding been
made. Prices are quoted exclusive of, and Licensee will pay, applicable
freight and insurance charges.
(f) Right to Offset. OSI may offset any amount owed by Licensee under this
---------------
Agreement against any amounts OSI owes Licensee for any reason. Licensee
may offset any amount owed by OSI to Licensee for any reason against any
amount Licensee owes OSI under this Agreement.
(g) Audits. On reasonable notice but no more than one time per quarter and
------
after signing Licensee's standard nondisclosure agreement, OSI may use
an independent auditor to inspect Licensee's facilities (including
computers) and applicable records only to verify Licensee's proper use
of and payment for all Products and Services. Licensee will keep records
regarding its use of the Products in sufficient detail to permit that
verification. If, following an audit, the independent auditor determines
that there has been an underpayment of any amounts due, OSI will invoice
Licensee for and Licensee will pay the amount of the underpayment plus
interest as provided in Section 2(d) from the date each payment was due.
If the underpayment for items under any Order was more than (*) percent
of the amount actually due, OSI will also invoice Licensee for and
Licensee will also pay OSI's actual inspection expensesand a (*)
surcharge on the underpaid amount. If, following an audit, the
independent auditor determines that there has been an overpayment of any
amounts due, Licensee will invoice OSI for and OSI will pay the amount
of the overpayment less the amount of OSI's actual audit expenses.
3. DELIVERY
--------
(a) Delivery. Except as set forth in a Work Order or notice from Licensee,
--------
OSI will pack and ship the Products according to its standard practice,
F.O.B. factory, with freight and insurance prepaid and invoiced to
Licensee. Licensee will reimburse OSI for any extra costs incurred to
comply with Licensee's special packing and shipping arrangements.
Scheduled delivery dates are only estimates. Each shipment is a separate
sale obligating Licensee to pay OSI whether the shipment fully or
partially fulfills an Order. Licensee has 60 days from receipt to verify
that all Products have been received. OSI will replace missing Products
(including all shipping) at no charge.
(b) Title, Risk of Loss. Licensee will not acquire title to Products. Risk
-------------------
of loss for the Products will pass to Licensee when received by Licensee
at its facility.
(c) Modifications and Cancellation.
------------------------------
(1) Professional Services to be provided under a Statement of Work may
be canceled either (a) on 45 days notice by Licensee, or (b)
immediately upon Licensee's written notice to OSI of a material
breach of this Agreement by OSI, but Licensee will pay for all
Professional Services properly provided by OSI through the date of
cancellation at OSI's then-current time and materials rates
(subject to the limitations of Section 2(b) and not to exceed the
total amount due under that Statement of Work) and all costs
reasonably incurred by OSI in connection with that cancellation.
(2) Professional Services can be modified by written notice from
Licensee at any time. OSI will notify Licensee of any proposed
increase in costs, delay in schedule or other consequence from that
request, Licensee will notify OSI of any proposed decrease in
costs, acceleration in schedule or other consequences, and the
change will be implemented if the parties agree to a modification
to the terms of the Statement of Work.
(3) If Licensee modifies or cancels an Order for Products without cause
or without the required notice, Licensee will pay OSI's out-of-
pocket expenses incurred in connection with the modification or
cancellation.
4. TERM; TERMINATION
-----------------
<PAGE>
(a) Term. This Agreement will commence on the Effective Date and
----
remain in effect for 24 months ("Term"), and unless sooner terminated,
will automatically be renewed on a month-by-month basis until either
party provides the other with 30 days' notice of its intention not to
renew.
(b) Termination of Agreement. This Agreement may be terminated
------------------------
(1) by either party on breach by the other party remaining uncured 30
days after notice specifying the breach with particularity or (2) by
notice if the other party becomes insolvent, bankrupt or makes an
assignment for the benefit of creditors.
(c) Survival. On expiration of the Term or termination of this
--------
Agreement for any reason, the obligations of Licensee to pay amounts
properly owed to OSI and the obligation of each party to discharge any
liability or other obligation incurred before expiration or termination
will survive, together with the provisions of the following Sections:
2(b)-(h), 4(d), 5 and 7-11.
(d) Termination of Licenses. The licenses granted in Section 5(b)
-----------------------
will terminate upon the earliest of the following to occur: (1)
termination of this Agreement by OSI under Section 4(b) (2) any
violation by Licensee of Section 5(h), (3) notice from Licensee or (4)
expiration of the term otherwise expressly agreed upon by the parties.
On termination of any license under this Section, Licensee will
immediately destroy or return to OSI all copies of the Product then in
its possession or under its control. Licensee will have no continuing
rights to that Product, whether alone or as part of Combined Software.
5. LICENSES
--------
(a) General. This Section sets forth the rights granted to Licensee for the
-------
Products identified at Exibit 1.(*) The parties agree that OSI may
conduct the audit(s) as provided in Section 2(g) above. Vendor Software
may be subject to additional license restrictions and rights specified
in licensing documents accompanying the Products. Except for Rulesets
which are provided in NetExpert(R)'s 4GL programming language and
"API's" and "header files" for which source code is provided, Licensee
will receive only an object code license for Products.
(b) License Grant. Subject to the terms of this Agreement, OSI grants
-------------
Licensee and Licensee accepts a perpetual, United States wide, personal,
non-transferable (except as provided herein), non-exclusive license,
without the right to sublicense, to load, install, execute, display and
store OSI and Vendor Software only within the United States solely for
its own internal use and to use the Manuals and Deliverables other than
OSI Software for that purpose. Subject to the terms of this Agreement,
Licensee may also (1) modify rules and data files included in OSI
Software, and (2) modify OSI Software, link, combine or otherwise
operate OSI and Vendor Software with Licensee Software and use the
resulting Combined Software solely for Licensee's internal purposes.
Except as expressly provided herein no other rights are granted to
Licensee.
(c) Term, Limitations. The term of the license granted in Section 5(b) will
-----------------
continue perpetually until terminated under Section 4(d), but Support
Services will only be provided under Exhibit 2 while Licensee has a
current Support Services subscription. Licensee will not, nor will it
permit others to, use Products to develop code, objects, modules or
programs which modify or substitute for code, objects, modules or
programs in the Products. OSI and its Vendors retain title to all
Products and all legally protected rights in Products, subject only to
the licenses granted under this Agreement. Unless expressly disclosed
and agreed to by Licensee, and except for OSI authorization codes
designed to protect against non-OSI access to OSI Software Product
source code and for OSI license keys used to make OSI Software Products
"functional" for Licensee, Products may not contain authorization codes,
lockout software or both to restrict their operation to properly
licensed uses.
(d) Intellectual Property. Products are copyrighted. Licensee will not
---------------------
sublicense Products and will not copy, alter, adapt, modify or make
derivative works of Products except as expressly permitted by this
Section. Licensee may make a reasonable number of backup and archival
copies of OSI and Vendor Software for "cold backup" only (i.e., only one
copy may be in use in any fashion at any time), provided that all
copyright, patent, trademark and other proprietary notices on and in the
Products are simultaneously copied. Licensee may make a reasonable
number of copies of Manuals under the terms of this Agreement solely for
the purposes permitted in Section 5(b). Licensee will not alter or
remove any copyright, patent, trademark or other proprietary notice from
the Products. Products may contain processes and techniques that are
protected by patents. No license to use these processes and techniques
apart from the Products is granted. Licensee will not acquire any right
to the trademarks or tradenames of OSI and its Vendors. Licensee will
not use, apply to register or register a trademark or trade name which
is the same as or confusingly similar to any used by OSI or a Vendor.
<PAGE>
(e) Transfer to Alternative or Additional Computes. Licensee will need to
----------------------------------------------
provide notice to and obtain the requisite authorization codes from OSI
before a transfer is affected.
(f) Reverse Engineering., Except for Rulesets which are provided in
-------------------
NetExpert's 4GL programming language and except for "API's" and "header
files", Licensee will not, and waives to the fullest extent permitted by
law any right to, reverse engineer, decompile or disassemble or
otherwise attempt to derive the source code for or operation of OSI
Software and Vendor Software, or to decode, de-encrypt or engineer
around any authorization codes, lockout software or other security
measures contained in the OSI Software.
(g) Use of Products to Provide Services to Third Parties. Except as
----------------------------------------------------
provided in Section 5(h), Licensee will not use Products to provide
network management or operations support services to any third party,
whether on its own network, through its own network elements, on the
network of a third party, through the network elements of a third party,
or otherwise, without executing a network services agreement with OSI
and complying with the terms of that agreement.
(h) Transfers. Except as provided for under Section 12 of this Agreement,
---------
Licensee will not rent, license, sell or otherwise transfer any portion
of the Products. Any purported transfer not provided for under Section
12 of this Agreement will be void, will be a breach of this Agreement
and will cause the licenses granted in this Agreement to automatically
terminate.
Further notwithstanding the foregoing, Licensee may assign its rights
and obligations hereunder to one or more of the following entities: (i)
Cook Inlet/VoiceStream PV/SS PCS, LLC (ii) Cook Inlet/VoiceStream PCS,
LLC (iii) Cook Inlet/VoiceStream GSM II PCS, LLC, or (iv) Cook
Inlet/VoiceStream GSM III PCS, LLC (collectively "Cook Inlet/VoiceStream
LLCs"), so long as Licensee owns no less than a 49.9% interest in the
assignee(s) Cook Inlet/VoiceStream LLC(s) at the time of the assignment.
(i) Reservation of Rights, Third Party Beneficiaries. Except as set forth
------------------------------------------------
in this Agreement, OSI reserves to itself and Vendors all rights to
engage in activities which, absent a grant of rights, would give rise to
liability for infringement of intellectual or intangible property
rights. Oracle Corporation is a third party beneficiary of this
Agreement and may directly enforce its rights under this Agreement and
in its intellectual property directly against Licensee.
(j) Underlying Licenses; Licensee Software. Licensee will ensure that valid
--------------------------------------
licenses for all required third party software are properly obtained and
in place. Licensee Software is copyrighted, and OSI has no rights or
licenses therein. Licensee and its Vendors retain title to all Licensee
Software and all legally protected rights in the Licensee Software.
Except as set forth in this Agreement, Licensee reserves to itself and
Vendors all rights to engage in activities which, absent a grant of
rights, would give rise to liability for infringement of intellectual or
intangible property rights.
6. INSTALLATION, ACCEPTANCE, SUPPORT, TRAINING
-------------------------------------------
(a) Installation and Control. Except as set forth in a Statement of Work,
------------------------
OSI has no responsibility for installing, testing, managing or
controlling the Products.
(b) Acceptance. For Products on the Price List and any other Product not
----------
provided under a Statement of Work, the Product will be accepted if it
performs substantially as described in its Manual in effect at the time
of delivery ("Documentation"). Deliverables will be accepted if they
substantially conform to the specifications set forth in the applicable
Statement of Work or in a requirements document provided as a
Deliverable under a Statement of Work. Services. Exhibit 2 contains the
--------
terms upon which OSI will provide Support Services at Prices set forth
in the Price List. Professional Services will be provided by OSI to
Licensee under consecutively numbered Work Orders entered into by the
parties under and made part of this Agreement.
(c) Training. Except as set forth in a Work Order or other Exhibit to this
--------
Agreement, OSI and Vendor training will be at an additional fee in
accordance with the provider's rates then in effect, and subject to the
provider's cancellation policies, Licensee will reimburse OSI and its
Vendors for all reasonable preapproved travel and other out-of-pocket
expenses incurred by them in connection with any training they may
furnish.
7. OWNERSHIP, PROPRIETARY RIGHTS
-----------------------------
(a) Ownership. All right, title and interest to copyrights, trade secrets,
---------
patents and other intellectual property rights (1) in the Products will
remain the exclusive property of OSI and its Vendors, as applicable, and
(2)
<PAGE>
in Licensee Software will remain the exclusive property of Licensee. For
Combined Software, the parties will each retain full and exclusive
rights to those portions of their respective software that are
incorporated into the Combined Software. Combined Software will not be a
joint work, and upon termination of the License to any Product included
in Combined Software, Licensee's right to use that Product even as part
of Combined Software will terminate, and OSI's right to use any portion
of the Combined Software created or owned by Licensee will terminate.
Licensee shall own all rights and title to the source code to any
software Licensee properly develops under this Agreement.
(b) Proprietary Rights. All aspects of OSI Software and Vendor Software,
------------------
including programs, methods of processing, program design and structure,
the interaction and unique programming techniques they employ and their
screen formats, are Information and will (1) remain the exclusive
property of OSI or its Vendors, (2) not be used except as permitted by
this Agreement, and (3) not be disclosed or otherwise communicated by
Licensee, directly or indirectly, to anyone except as permitted by this
Agreement. All aspects of Licensee Software Software, including
programs, methods of processing, program design and structure, the
interaction and unique programming techniques they employ and their
screen formats, are Information and will (1) remain the exclusive
property of Licensee, (2) not be used except as permitted by this
Agreement, and (3) not be disclosed or otherwise communicated by OSI,
directly or indirectly, to anyone except as permitted by this Agreement.
8. REPRESENTATIONS & WARRANTIES
----------------------------
(a) Limited OSI Representations and Warranties. OSI represents and warrants
------------------------------------------
that except as set forth in Section 8(b):
(1) (*)
(2) For any OSI Software covered by Support Services, and for any
period of extended warranty, until December 31, 2000, OSI Software
will include Year 2000 capabilities such that in the normal
operation of OSI Software: (1) values for current dates before,
during and after the Year 2000 will not cause interruptions in
normal operation, except that because of UNIX limitations, current
dates greater than or equal to 2038 cannot be supported on 32 bit
machines, or 64 bit machines using 32 bit dates, (2) manipulation
of date-related data will produce desired results before, during
and after the year 2000 and management of stored dates greater than
or equal to 2038 will not cause problems on 32 bit machines, (3)
date elements in interfaces and data storage will permit
specification of century to eliminate date ambiguity, (4) for any
date element represented without century, two digit years greater
than or equal to 69 will convert to 19xx and two digit years less
then 69 will covert to 20xx, and (5) leap years will be properly
processed and recognized. No warranty is provided for any date
related problems caused by Vendor Software, or by any other
software or any hardware connected to OSI Software. The Services
and Products will not infringe any trade name, trademark, service
mark, copyright, patent, trade secret, literary, dramatic or
intellectual property right of any third party, or infringe upon
the right of privacy or publicity of any person or entity, or
constitute a libel or slander of any person or entity.
(3) The Services and Products will conform in all material respects
will the slated requirements of this Agreement. All Services
provided by OSI will be performed in a professional manner and
shall be of a high grade, nature, and quality.
(4) (*)
(b) Mutual Representations and Warranties. OSI and VoiceStream each
-------------------------------------
represent and warrant that:
(1) Their execution, delivery, and performance of this Agreement (i)
have been authorized by all necessary action, if any; (ii) do not
violate any law, rule, or regulation or the terms of any order,
judgment, or decree to which either party is subject, or the terms
of any material agreement to which either party or any of its
assets may be subject; and (iii) are not subject to the consent,
approval, or other action of any third party.
(2) This Agreement is a valid and binding obligation of each party
enforceable against each party in accordance with its terms.
(3) Each party shall have, obtain and maintain all proper business
registrations or licenses required by federal, state or local law,
and, on behalf of itself and its employees, shall pay all income
taxes, unemployment taxes, social security, workers' compensation
insurance, or other similar taxes, expenses or deductions arising
from its activities under this Agreement.
(c) Modifications and Vendor Software. OSI makes no warranty as to any
---------------------------------
portion of OSI Software that is modified, altered or combined with any
other software, such as Rulesets, by any party other than OSI or its
agents or representatives, and as to any of the related Manual
provisions, or as to any of the Vendor Software and related Manuals. OSI
will transfer to Licensee any assignable warranties that OSI receives
from Vendors for Vendor Software. OSI will cooperate with Licensee to
obtain warranty service for Vendor Software as reasonably necessary.
(d) Pre-Release OSI Software. Pre-Release OSI Software (such as "alpha" or
------------------------
"beta" versions of new or existing OSI Software) may be provided in
OSI's discretion to Licensee solely as an accommodation for its
evaluation, comment and familiarization. Pre-Release OSI Software is
provided without warranty of any nature. In particular, Pre-Release OSI
Software may contain bugs and inoperable features that may not be
corrected by OSI, and OSI may change Pre-Release OSI Software
significantly prior to commercial release, or even not produce a
commercial product based on Pre-Release OSI Software.
(e) Warranty Limitations. SECTIONS 8(a), (b) AND (c) CONTAIN THE EXCLUSIVE
--------------------
WARRANTIES FOR PRODUCTS AND SERVICES. EXCEPT FOR THOSE WARRANTIES,
PRODUCTS AND SERVICES ARE PROVIDED "AS-IS." NO OTHER WARRANTY, ORAL OR
WRITTEN, IS EXPRESSED OR IMPLIED. EXCEPT TO THE EXTENT EXPRESSLY
PROVIDED HEREIN, OSI DOES NOT WARRANT THAT (1) ANY PRODUCT OR SERVICE
WILL MEET LICENSEE'S REQUIREMENTS, (2) THE PRODUCTS WILL PERFORM IN
EVERY OPERATING ENVIRONMENT, (3) THE OPERATION OF THE PRODUCTS WILL BE
UNINTERRUPTED OR
<PAGE>
ERROR FREE, OR (4) ANY DEFECT OR MALFUNCTION IN THE PRODUCTS OR SERVICES
IS CORRECTABLE OR WILL BE CORRECTED. OSI SPECIFICALLY DISCLAIMS THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE . The limited warranty provided in this Section 8 will not apply
to, and OSI will have no warranty obligation with respect to, any defect
or malfunction (1) to the extent it results from (A) improper
modification or use by Licensee, or (B) hardware, software, interfacing
or supplies other than those provided by OSI in the form provided by
OSI, or (C) any cause other than ordinary use or (2) with respect to the
warranties set forth in Section 8(a)(*), (2), (6), (8) and (9), for
which OSI or Licensee (A) is unable to reproduce the nonconformity, (B)
OSI is not provided with a description of the parameters, procedures or
conditions which generate the problem in sufficient detail to permit
isolating the code which causes the problem or (C) OSI is not provided
with all data files, rules, Licensee Software and system access
reasonably required to reproduce and analyze the problem.
9. LIMITATIONS, REMEDIES
---------------------
(a) Exclusive Remedies. Licensee's sole remedy for a breach of the limited
------------------
warranty in Section 8(a) will be for OSI to use commercially reasonable
efforts to restore the Products to substantially conforming condition
under the terms of Exhibit 2, or if OSI is unable after such efforts to
so restore the Products, then for Licensee to obtain a full refund of
the purchase price of the Products upon return of those Products to OSI
and written certification by Licensee that it will no longer use the
returned Product in any manner whatsoever.
(b) Non-Standard Uses. Products are designed for standard commercial
-----------------
applications such as communications networks only and are not intended
for planning, construction, maintenance or direct operation of critical
systems or facilities, such as aircraft control systems and nuclear or
hazardous waste facilities. Licensee will not use Products for such non-
standard applications without OSI's prior consent, which will require
additional contractual safeguards. If Licensee uses Products in such a
non-standard application, it will be solely liable for the use and will
indemnify and hold OSI harmless from all loss, damage, expense or
liability in connection with that use.
(c) Aggregate Liability. NEITHER PARTY WILL BE LIABLE FOR DAMAGES IN EXCESS
-------------------
OF THE AMOUNTS PAID TO OSI FOR THE PRODUCTS OR SERVICES HEREUNDER (*).
THIS LIMITATION WILL (1) APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER
CONTRACT OR TORT, INCLUDING NEGLIGENCE AND STRICT LIABILITY, AND (2) NOT
APPLY TO INDEMNITY UNDER SECTION 10 OR TO LIABILITY FOR REAL PROPERTY
DAMAGE, DEATH OR BODILY INJURY CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE LIABLE PARTY OR ITS VENDORS.
(d) Damages. NEITHER PARTY WILL BE LIABLE, REGARDLESS OF THE FORM OF
-------
ACTION, FOR LOST DATA, REVENUES, PROFITS OR SAVINGS, OR FOR INDIRECT,
CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES, EVEN IF THE
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF THE DAMAGES.
(e) Time to Bring Claim. No action will be brought against either party
-------------------
more than 18 months after the cause of action first arises.
10. INFRINGEMENT INDEMNITY
----------------------
(a) Indemnification by OSI.
-----------------------
(1) OSI will defend Licensee against any claims, and indemnify and
hold Licensee harmless against any judgments, directly or
indirectly resulting from a claimed infringement or violation of
any copyright, patent or other intellectual property right with
respect to OSI Software arising under the laws of the United
States of America or the State of Washington. OSI will have no
liability for any such claims or judgments to the extent that they
are based on (a) the actions of Licensee, its employees or agents,
(b) use of a version, modification or adaptation of OSI Software,
if the infringement would have been avoided by the use of a then-
current unaltered release of OSI Software, (c) use of Combined
Software, if OSI Software operated independent of the Combined
Software is not the cause of the infringement, or
<PAGE>
(d) use of OSI Software in combination with any computer software,
hardware or data not delivered in that combination by OSI.
(2) On receiving notice of a claimed infringement, and without
limiting its indemnification and hold harmless obligations as
stated in Section 10(a)(1), OSI may (a) settle on terms that
permit continued use of OSI Software, (b) discontinue distribution
of the OSI Software that is the cause of the claim and provide a
substitute for that OSI Software, (c) modify OSI Software to be
non-infringing, or (d) if the foregoing remedies are not
reasonably available, grant Licensee (i) a full refund for all OSI
software license fees paid to OSI between the effective date of
this Agreement and the date that the foregoing remedies are
determined to be "not reasonably available" if such determination
is made no later than 2 years from the effective date of this
Agreement or (ii) alternatively, if such determination is made
after 2 years from the effective date of this Agreement, a credit
for the amounts paid for the depreciated value of the relevant
portion of OSI Software (based on a (*) month life beginning on
the date of delivery to Licensee) and accept its return.
(3) THIS SECTION PROVIDES LICENSEE'S SOLE AND EXCLUSIVE REMEDY AGAINST
OSI FOR INFRINGEMENT OF PATENTS, COPYRIGHTS OR OTHER INTELLECTUAL
PROPERTY RIGHTS.
(b) Indemnification by Licensee. Licensee will defend OSI and its Vendors
---------------------------
against any claims, and indemnify and hold OSI and its Vendors harmless
against any judgments, directly or indirectly resulting from any claimed
infringement or violation of any copyright, patent or other intellectual
property right with respect to Products to the extent that Licensee
Software or any of the acts described in Section 10(a)(1) is the cause
of the claimed infringement or violation. THIS SECTION PROVIDES OSI'S
SOLE AND EXCLUSIVE REMEDY AGAINST LICENSEE FOR INFRINGEMENT OF PATENTS,
COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS.
(c) Cooperation. Notwithstanding the above, an indemnifying party is under
-----------
no obligation to defend or indemnify another party unless: (1) the
indemnifying party has been promptly notified of the claim or suit and
furnished with a copy of each material pleading, communication, notice
and other action relating to the claim or suit; (2) the indemnified
party permits the indemnifying party, at the indemnifying party's
expense, to assume sole authority to conduct the trial or settlement of
the claim or suit and any negotiations related to it; and (3) the
indemnified party promptly provides all information and assistance
reasonably requested by the indemnifying party in connection with the
claim or suit, all at the indemnifying party's expense for the
indemnified party's out-of-pocket expenses.
11. GENERAL
-------
(a) Confidential Information. In the course of their dealings, each party
------------------------
will acquire Information about the other, including Information
regarding business activities and operations, technical information and
trade secrets of the party and its partners. Each party will hold in
confidence any Information that it receives from the other party, not
use that Information for purposes other than performance of this
Agreement and not disclose the Information except to those employees
and advisors who (1) have a need to know the same, and (2) are bound by
law or have agreed in writing to maintain the Information in
confidence. Information includes all nonpublic aspects of the Products,
including programs, methods of processing, program design and
structure, the interaction and unique programming techniques employed,
and performance data and test results. It also includes the nonpublic
plans of each party and Vendors for new products and services, product
improvements and marketing strategies. If a party discovers Information
has been improperly used, disseminated or published, it will
immediately notify the other party and take all reasonable actions to
minimize the impact of the disclosure.
(b) Excluded Information. Even if marked as confidential, the obligations
--------------------
in Section 11(a) will not apply to Information generally available to
or known to the public, known by the receiving party without obligation
of confidentiality before the negotiations leading to this Agreement,
independently developed by the receiving party outside the scope of
this Agreement, lawfully disclosed to the receiving party without
restriction by a third party having the right to make the disclosure or
required to be publicly disclosed to a tribunal. In the case of
required disclosures to tribunals, the receiving party will promptly
notify the other party of the proceeding and fully assist the
disclosing party to obtain protective orders maintaining the
confidentiality of the Information.
<PAGE>
(c) Compliance with Export and Other Laws. The Products, Services and all
-------------------------------------
related rights, technical data and information are subject to export
controls imposed by the U.S. Government and other countries. Licensee
will not transmit any Products or information relating to Products or
Services outside the United States of America, or to any person or
entity prohibited by the U.S. Government, whether by name, by
citizenship, residency or otherwise, and will comply with all
applicable export control restrictions. Each party, at its expense,
will comply with all applicable laws, regulations, codes and
ordinances. Neither party will be bound by any provision of this
Agreement to the extent, but only to the extent, that it violates
applicable law.
(d) Notices. Notices, consents, approvals and communications given under
-------
this Agreement will be in writing, in the English language, sent by
registered or certified mail, return receipt requested, postage
prepaid, or by a courier service that obtains signed acknowledgement of
receipt, to the address indicated below the signature block of this
Agreement or to such other address as the affected party designates by
prior notice and effective on the date received unless a later date is
otherwise indicated in the notice, consent or communication.
(e) Assignment. Except as provided for under Section 12 of this Agreement,
----------
this Agreement is not assignable by either party without the prior
consent of the other party. This Agreement will be binding on and inure
to the benefit of the parties and their respective successors and
permitted assigns.
(f) Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of Washington, United States of
America, excluding choice of law principles. The United Nations
Convention on Contracts for the International Sale of Goods will not
apply.
(g) Arbitration. Any dispute, controversy or claim arising out of or
-----------
relating to this Agreement will be finally resolved by binding
arbitration under the Rules of Arbitration of the United Nations
Commission on International Trade Law in effect at the time of the
arbitration ("UNCITRAL Rules"). There will be three arbitrators
selected as follows: one arbitrator will be selected by OSI, one
arbitrator will be selected by Licensee and the third arbitrator will
be selected jointly by the first two arbitrators, except that if either
party fails to select an arbitrator within 30 days after initiation of
arbitration, or if the first two arbitrators fail to select the third
arbitrator within 45 days after the initiation of arbitration, the
President of the Washington Bar Association at that time will make the
selection.
(1) The venue of the arbitration will be King County, Washington. On
reasonable notice to the other party and the arbitration panel,
parties will be entitled to use expert and rebuttal witnesses.
(2) Each party will pay its own fees and expenses incurred in
connection with the arbitration. Common expenses of the arbitration
(such as the fees and expenses of the arbitrators) will be borne by
the parties in such amounts or proportions as the arbitrators may
determine.
(3) The award of the arbitrators will be (a) by majority vote, (b) in
writing (including reasons), and (c) final and binding on the
parties. Judgment upon the award may be entered and enforced by any
court of competent jurisdiction.
(4) In no event will the arbitrators award damages that are not
permitted under the express terms of this Agreement.
(5) Without prejudice to Article 26 of the UNCITRAL rules (Interim
Measures of Protection), either party may apply to any court of
competent jurisdiction for such interim relief as it considers
appropriate, without the need to post bond or other security, or if
required, then the minimum bond or other security permitted.
(h) Equitable Relief. Any breach of a party's obligations with respect to
----------------
intellectual property rights will cause irreparable injury for which
there are no adequate remedies at law. The aggrieved party will be
entitled to equitable relief in addition to all other remedies that may
be available, without the posting of bond or other security, or if
required, then the minimum bond or security so required.
(i) Force Majeure. Neither party will be liable or held in default for a
-------------
failure or delay in performing its obligations under this Agreement,
other than to make payment for amounts owing or to comply with Sections
5 and 7, due to any cause beyond its reasonable control, so long as the
party takes all reasonable steps to avoid and minimize the impact of
such cause.
<PAGE>
(j) Entire Agreement. This Agreement, including its Exhibits, constitutes
----------------
the entire agreement between the parties with respect to its subject
matter and supersedes all prior communications, both oral and written,
between the parties. Additionally, the terms and pricing regarding OSI
maintenance and support services stated in this Agreement replace the
terms and pricing regarding OSI maintenance and support services stated
in the End User License Agreement, OSI Contract Number EUA-150, dated
June 26, 1996 between OSI and Omnipoint Communications, Inc., as that
End User License Agreement has been amended and supplemented by
addenda. Except as set forth in Section 11(k), this Agreement may not
be modified, and no rights will be waived, except by an instrument in
writing signed by a duly authorized representative of both parties. If
the terms of this Agreement conflict with the terms of any of its
Exhibits, the Exhibits will prevail. As used in this Agreement, the
term "including" means by way of example and not limitation.
(k) Modifications to Exhibits. If a change to Exhibit 2 materially reduces
-------------------------
Support Services during a period for which Licensee has already paid
fees for those Support Services, Licensee may terminate those Support
Services for the remainder of the period and receive a pro rata refund.
Waivers. No waiver by a party of a breach of this Agreement will
-------
constitute a waiver of any other breach of the same or any other
provision of this Agreement.
(l) Execution. Neither this Agreement or any modification of it will be
---------
binding on either party unless it has been signed on behalf of such
party by one of its Executive Officers. This Agreement may be executed
in multiple counterparts, each of which will be deemed an original and
all of which will constitute together one agreement. A counterpart
delivered to a party by facsimile or similar electronic means will be
deemed an original, equivalent in all respects to a manually executed
counterpart.
(m) Intentional Risk Allocation. The provisions of this Agreement reflect
---------------------------
an informed, voluntary allocation between the parties of the risks
(known and unknown) that may exist in connection with this Agreement.
This voluntary allocation was a material part of the bargain between
the parties and the economic and other terms were negotiated and agreed
to by the parties in reliance on that allocation.
(n) Independent Contractors. The parties are independent contractors.
-----------------------
Under no circumstances will the employees of one party be deemed the
employees of the other for any purpose. This Agreement does not grant
authority for either party to act for the other in an agency or other
capacity, or to make commitments of any kind for the account of or on
the behalf of the other.
(o) Severability. If any provision of this Agreement is determined to be
------------
invalid or unenforceable, it will be deemed to be modified to the
minimum extent necessary to be valid and enforceable. If it cannot be
so modified, it will be deleted and the deletion will not affect the
validity or enforceability of any other provision unless, as a result,
the rights of either party are materially diminished or the obligations
and burdens of either party are materially increased so as to be unjust
or inequitable.
(p) Cumulative Remedies. Except as otherwise provided, the rights and
-------------------
remedies in this Agreement are cumulative and in addition to any other
remedies available at law or equity.
12. Other (*)
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized representatives.
OBJECTIVE SYSTEMS INTEGRATORS, INC. VOICESTREAM WIRELESS CORPORATION
By: /s/ Gregg B. Brelsford By: /s/ Bob Stapleton
------------------------------ ----------------------------------
Title: Managing Attorney Title: President & COO
Date: March 28, 2000 Date: March 28, 2000
Address for Notices:
Objective Systems Integrators, Inc. ________________________________________
101 Park WAy ________________________________________
Folsom, CA 95630 ________________________________________
Attn: Contracts Administrator Attn:___________________________________
Business Telephone: (916) 353-2400 Business Telephone (____) ____________
Facsimile for Notices: (916) 353-0647 Facsimile for Notices (____)____________
<PAGE>
Exhibit 1(*)
---------
Exhibit 2
---------
Support Services
1. DEFINITIONS
------------
(a) Defect. An error in OSI Software or a failure of OSI Software to
------
conform substantially with its then-current documentationthat can be
reproduced by OSIor by Licensee for OSI's observation. Defects fall into
three categories as follows:
(1) Priority 1 (Production System Failure). Licensee's primary
--------------------------------------
production system (a) is completely unavailable, (b) has a problem
that occurs with sufficient frequency that the system is effectively
rendered inoperable, or (c) is affected such that critical business
processes are unavailable. In each case, no Workaround can be
immediately identified. For Priority 1 Defects, both OSI and
Licensee will commit full-time resources to resolve the situation.
(2) Priority 2 (System Impairment). Licensee's business processes are
------------------------------
impacted or impaired, but Licensee's primary production system still
functions.
(3) Priority 3 (Minor Fault). A Priority 1 or 2 Defect where a
------------------------
Workaround has been identified, the impact on Licensee is minor, the
Defect has no material operational impact on Licensee, or the Defect
does not require immediate attention.
(b) Emergency Release. A new version of OSI Software that incorporates
-----------------
Patches to rectify one or more Priority 1 or Priority 2 Defects. An
Emergency Release may include additional documentation.
(c) Patch. Replacement of, or provision of an addition to, a portion or
-----
module of OSI Software. A Patch may include additions or replacement to
existing documentation
(d) Remote Access. Access to Licensee's systems required by OSI to provide
-------------
Support Services, which may include dedicated connection, dial-up modem,
internet, telnet or other means by which OSI can gain the required
access.
(e) Workaround. A modification to the procedures Licensee follows or the
----------
data it supplies when using OSI Software. A Workaround is designed to
enable OSI Software to operate without materially and adversely
affecting Licensee's ability to use OSI Software in its production
environment.
2. GENERAL.
-------
(a) NetExpert Framework Products. Provided Licensee (1) is current in
----------------------------
paying all applicable Support Services charges, as set forth in the
Price List at the time Support Services charges are incurred, (2) is not
in material breach of this Agreement, and (3) has provided OSI with
timely Remote Access to the affected system, OSI will provide to
Licensee the Support Services specified below. Support Services will be
provided only for the current generally available release, with all OSI
recommended NetExpert(R), operating system, database and other patches
applied; provided, that for six months after the introduction of a new
release, OSI will use reasonable efforts to support the previous
release. After that time, OSI will provide Support Services for
superseded releases on a time and materials basis.
(b) Vendor Software. As part of Support Services, and provided they are
---------------
available for the form of Vendor Software licensed, OSI will procure for
Licensee's benefit annual maintenance agreements with its Vendors for
all Vendor Software.
<PAGE>
(c) Application Components and Rulesets. Because Application Components and
-----------------------------------
Rulesets may vary between end-users even for the same network element,
management operation or other operation, and because Application
Components and Rulesets may be modified by others after delivery by OSI,
unless otherwise agreed to by OSI in writing, Support Services for
Application Components and Rulesets are provided only on a time and
materials basis. The following Sections describe the limited Support
Services available for Application Components and Rulesets when such
Support Services are made available by OSI.
3. UPDATE SERVICES
---------------
(a) NetExpert Framework Product Updates. On request by Licensee, OSI will
-----------------------------------
provide Licensee at no additional cost with new and interim versions of
NetExpert Framework Products at the time each version is generally made
available to its other customers. OSI will make such revisions and
enhancements to NetExpert Framework Products as it deems necessary and
appropriate. OSI may discontinue updating NetExpert Framework Products
at any time or may incorporate any portion of existing NetExpert
Framework Products into a new and distinct Product. In the latter case,
OSI will offer to make the new Product available to Licensee at its
then-current Price.
(b) Vendor Software Updates. Vendors will, from time to time, release new
-----------------------
products or new or interim versions of Vendor Software that OSI will
incorporate into or use with OSI Software. OSI will inform Licensee of
Vendor new releases when, in OSI's judgment, they may be appropriate for
use in or with OSI Software. For Vendor Software licensed to Licensee by
OSI, new releases which OSI has the right to sublicense will be made
available to Licensee in a timely manner consistent with their receipt
from the Vendor and at OSI's then-current Prices.
(c) Application Components and Rulesets. Generally, Application Components
------------------------------------
and Rulesets are only updated on a time and materials basis.
Occasionally OSI may update an Application Component or Ruleset for a
new release of network element software, but unless OSI has agreed
otherwise with Licensee, that updated Application Component or Ruleset
will be made available for license by payment of a separate license fee,
and integration and customization of that Application Component or
Ruleset into Licensee's system will be required either by OSI, by
Licensee or by a party contracted by Licensee.
4. EXTENDED WARRANTY SERVICES
--------------------------
(a) Extended Warranty. By maintaining a current subscription for Support
-----------------
Services for a Product, the limited warranty provided in Section 8(a) of
the Agreement will, subject to the terms of the Agreement, be extended
as set forth in this Section 4 for that Product.
(b) NetExpert Framework Products. If Licensee believes that there is a
----------------------------
Defect in NetExpert Framework Products Licensee will (1) promptly notify
OSI, describing the parameters, procedures and conditions that result
from the Defect in sufficient detail to permit OSI to isolate the code
that caused the Defect, and (2) provide OSI with all data files,
database rules, Licensee Software and Remote Access (and where required
by OSI, onsite access) required to reproduce and analyze the Defect. If
OSI is unable to reproduce the Defect, it will cooperate with Licensee
to determine the reason for this inability. If but only if neither party
is thereafter able to reproduce the Defect within 15 calendar days of
OSI's receipt of the information required to be provided to OSI pursuant
to Subsection 4(b)(2), OSI shall have no responsibility to take further
action.
(c) Application Components and Rulesets. When Support Services are
-----------------------------------
available for Application Components or Rulesets, the OSI Extended
Warranty only covers Application Components and Rulesets in the form
provided by OSI; on receipt by OSI of the notice described in Section
4(b), OSI will analyze the Application Component or Ruleset in the form
provided by OSI to determine if the Defect is reproducible. OSI will
have no obligation for Defects not in the original Application Component
or Ruleset provided by OSI.
(d) Vendor Software. For Vendor Software where a support agreement is in
---------------
place between OSI and the Vendor, OSI will use best efforts to verify
all Defects in the Vendor Software as quickly as is commercially
reasonable and to obtain a prompt resolution of the Defect from the
Vendor.
(e) Response Times. On notice of a Defect, OSI will during normal business
--------------
hours (unless Extended Services are purchased as described in Section
4(f)) (1) initiate work to verify the Defect, (2) advise Licensee of its
plans for resolving the Defect, and (3) use best efforts to resolve the
Defect, as follows, and OSI will
<PAGE>
promptly notify Licensee if a Defect cannot be resolved within these
time periods and will cooperate in good faith with Licensee to arrive at
an alternative period for resolution:
(1) Priority 1. OSI will promptly initiate work to verify a Priority 1
----------
Defect within two hours of being notified and will attempt to
resolve the Defect within 5 business days.
(2) Priority 2. OSI will initiate work to verify a Priority 2 Defect
----------
no later than the next business day and will resolve the Defect
within 10 business days.
(3) Priority 3. OSI will initiate work to verify a Priority 3 Defect
----------
within 30 business days and will include a Patch for the Defect in
the next update or version of OSI Software provided Licensee as
applicable.
(f) Response. OSI will work diligently to resolve Priority 1 and Priority 2
--------
Defects with either Workarounds, Patches or Emergency Releases. Whenever
a workaround is practical OSI will verbally advise Licensee to the
effect, followed by a confirmation posted on WebTAC or otherwise
provided in writing to Licensee. If a Workaround does not resolve the
Defect, OSI will use best efforts to provide a Patch or Emergency
Release. If a Workaround is provided and resolves the Defect, it will be
downgraded to Priority 3.
(g) Extended Services. 24 hour-a-day, 7 days-a-week Support Services are
-----------------
available for NetExpert Framework Products at an extra charge as shown
in the Price List. If Licensee purchases this option, the following
additional Support Services are available for resolution of Priority 1
Defects:
(1) Response. Licensee will be provided with a support
--------
telephone/paging number. OSI will attempt to respond within 15
minutes of receiving Licensee's call, message or page and will
promptly initiate work to verify the Priority 1 Defect.
(2) Resolution. OSI will use best efforts to resolve the Priority 1
----------
Defect within 2 hours and, if unable to resolve the Defect within
that period, will continue diligently to pursue resolution of the
Defect.
5. GENERAL ASSISTANCE
------------------
As a part of Support Services, OSI will provide Licensee with a reasonable
amount of generalized advice regarding the proper installation, configuration
and operation of OSI Software in the form provided by OSI. Additional General
Support Services are available on a time and materials basis.
6. HOTLINE SERVICES
----------------
Telephone Hotline Support will be available from 6:00 a.m. to 5:00 p.m.,
Pacific Standard Time, Monday through Friday (excluding OSI holidays) for
Extended Warranty Services and General Support Services.
7. WEBTAC
------
Subject to system availability, Licensee will have 24 hour-a-day, 7 days-a-
week access to OSI's Technical Assistance Center on the World Wide Web, URL
http://tac.osi.com/. Use of OSI's WebTAC is subject to the terms and
procedures posted on that site.
8. GENERAL MATTERS
---------------
(a) Contacts and Internal Support.
-----------------------------
(1) Licensee will designate a single employee who will be the primary
contact person and a single employee who will be the backup contact
person (either of whom is the "Contact Person") for all matters
related to Support Services. The Contact Person will have
successfully completed all relevant OSI training. Only the Contact
Person will be entitled to make use of Extended or Hotline Services
or OSI's WebTAC.
(2) All requests for Support Services and other assistance from within
Licensee's organization will be made through the Contact Person.
Licensee will be responsible for taking and documenting the
following actions to the extent reasonable and appropriate prior to
and after reporting any Defect to OSI, and Licensee will commit
reasonable appropriate resources to working on the Defect until the
source of the Defect is agreed upon:
<PAGE>
(A) Maintaining an up-to-date record of system changes such as
upgrades, patches and modifications to operating systems,
databases, device software and Products;
(B) Gathering all relevant information from the user reporting the
Defect;
(C) Identifying the nature of the Defect;
(D) Reproducing the error and documenting the steps required for
that reproduction;
(E) Eliminating physical causes such as connections, device
malfunctions and memory and CPU problems;
(F) Examining logs, records, archives, core files and other user
documentation;
(G) Reaching where possible a tentative conclusion regarding
causation;
(H) Providing OSI with proper remote connectivity and other
documentation and assistance required in connection with the
Support Services; and
(I) To the extent appropriate, interfacing with distributors of
interfacing systems such as the operating system, database
programs and other hardware and software, and working with those
distributors to eliminate or identify errors in their systems.
(b) Commencement. The first year of Support Services for each item of OSI
------------
Software begins on its Installation Date ("Services Commencement").
Renewal fees will be paid in advance on or before the anniversary of
Services Commencement. The schedule of renewal fees will be specified in
the then-current Price List.
(c) Comprehensive Coverage. Because of the interconnection between versions
----------------------
of NetExpert Framework Products and Vendor Software, if Licensee renews
Support Services on at least one computer for one NetExpert Framework
Product, Licensee must renew Support Services for all NetExpert
Framework Products it has licensed. Licensee has the option to purchase
available Support Services, if any, for all, some or none of the
Application Components or Rulesets it licenses from OSI.
(d) Automatic Renewal. Support Services will automatically renew each year
-----------------
unless Licensee cancels by notice to OSI at least 30 days prior to the
end of any Support Services year.
(e) Cancellation.
------------
(1) Support Services will be canceled as to a Product if and when the
license granted to Licensee for that Product is terminated. Any
unearned, prepaid amounts paid for such Support Services shall be
refunded to Licensee immediately upon such termination.
(2) Support Services will also be canceled at the end of any annual
period if Licensee has not paid the applicable renewal fees before
the end of the term. For a cancellation of this type, Licensee will
not be entitled to any refund of previously paid fees of any type.
(3) If Support Services are canceled , they will be canceled, effective
immediately, for all OSI Software and Vendor Software. Cancellation
of any Support Services will not, of itself, constitute termination
of the Agreement.
(f) Reinstatement. Licensee can reinstate Support Services by paying all
-------------
Support Services fees that are in arrears, plus any costs, on a time and
material basis, that OSI incurs to update installations to the current
version of OSI Software.
(g) Modifications and Unauthorized Uses. OSI will have no obligation to
-----------------------------------
support OSI Software if the need for support arises because it (1) has
been modified by Licensee, or (2) is being used in violation of the
terms of the Agreement. If a reported Defect is not a Defect in Products
but is actually a problem caused by user error, modification of Products
by a party other than OSI, or third party hardware or software other
than Vendor Software for which Support Services have been purchased, OSI
will have the right to invoice Licensee on a time and materials basis
for efforts provided by OSI personnel above 8 hours for each such Defect
reported to OSI.
<PAGE>
(h) Limitations. (*)
-----------
<PAGE>
EXHIBIT 10.10
January 28, 2000
Mr. Bud Mullanix
Dear Bud:
OSI is pleased to confirm our offer of employment to you for the position Vice
President, Human Resources, in our Folsom location. In this position you will
be reporting to me for a period not to exceed 90 days, after which you will
report to our Co-Chief Executive Officers. Your anticipated start date will be
February 14, 2000.
Base Salary: $130,000 per year.
Incentive Plan: OSI's standard Executive Compensation Plan, which currently
is structured to pay out 50% of base at target performance.
Option Grant. At the first meeting of the Board of Directors after your hire
- ------------
date, and subject to approval of the Board, you will be granted an option to
purchase 50,000 shares of OSI's common stock. The option price will be the Fair
market Value of OSI stock on the date the Board approves your grant. Options
will vest over 4 years from the grant date, as follows: as long as you continue
to meet the vesting requirements in our Option Plan, your right to acquire 25%
of the shares under option will vest 12 months after the grant date, and your
right to acquire 1/48 of the shares under option will vest each month
thereafter. Vesting will be tolled when you are on a leave of absence except as
otherwise required by law. This is a general summary. The actual terms of
option grants are as set forth in the Option Plan and Grant Agreement, both of
which that will be given to you at the time your grant is approved.
Standard Benefits. Insurance benefits will be effective on the first day of the
- -----------------
month following completion of 30 calendar days of employment. During your first
year, you will earn three weeks of vacation/sick time in accordance with our
standard policies. You may contribute any amount of your before tax
compensation, subject to the limits imposed by the Internal Revenue Service, to
the OSI 410(k) Plan. You may also participate in the OSI Employee Stock
Purchase Plan beginning with the first Plan enrollment date after you begin
work. Enrollment dates for the ESPP are April 30 and October 31. Finally,
based on our success and profitability, you may receive the benefit of
discretionary contributions to the OSI Profit Sharing Plan. Provided you
satisfy the eligibility requirements of that Plan (currently, completion of 90
days of employment and over 1000 hours of service in a Plan year, which runs
from July 1 through June 30), contributions are made at the end of each fiscal
year.
Notwithstanding the above, during the period from the commencement of your
employment with OSI through your eligibility for coverage under OSI's standard
insurance benefits, we will reimburse you for any amounts that are actually paid
by you to obtain extended COBRA coverage for your insurance benefits at your
current employer.
Severance Agreement. Promptly following your employment, OSI will enter into
- -------------------
its standard Severance Agreement with you. This Agreement provides for certain
salary continuation and other benefit in the event OSI has a Change in Control,
as more particularly defined. A copy of that Agreement is attached.
<PAGE>
Bud Mullanix
January 28, 2000
Page 2
Representations. As a condition to our offer of employment, you represent and
- ---------------
acknowledge that (1) your resume and employment application are complete and
accurate and do not contain any material misstatements, and (2) you have not
been convicted of any crime or found liable criminally or civilly for any action
or omission involving fraud, dishonesty or moral turpitude.
Contingencies. We reserve the right to investigate your prior employment
- -------------
history, personal references and educational background, as well as other
relevant information that is reasonably available to us. We may also review
your credit report, driving record and criminal background. Consistent with
legal requirements, your offer of employment is contingent on a satisfactory
background check. Under the Immigration and Naturalization Act of 1986, your
offer is also contingent on your ability to provide proof of your right to work
and your completion of an INS Form I-9.
Legal Matters. Please not that, as a condition of employment, you mist enter
- -------------
into an agreement to arbitrate all disputes arising out of or related to your
employment. This includes any issues related to the termination of your
employment and any claims of unlawful discrimination or unlawful harassment,
including sexual harassment. Only an arbitrator, and not a judge or a jury,
will hear these disputes. In addition, you must sign the attached Employee
Invention Agreement.
General. Your employment at OSI will be governed by the traditional legal
- -------
principals of employment at will. Both you and OSI have the right to terminate
the employment relationship at any time, with or without notice and with or
without cause. Except for the policies of at-will employment and mandatory
arbitration, we reserve the right to modify the terms and conditions of your
employment, including your compensation and your benefits. You agree at all
times to comply with OSI's policies communicated to you and with all applicable
laws, regulations, codes and ordinances.
OSI is eager for you to join us and encourage you to accept this rewarding and
challenging opportunity. We would appreciate your signing this letter below and
returning it to the undersigned as soon as possible, along with your signed
Employee Invention Agreement, your signed acknowledgement of our Alternative
Dispute Resolution Policy and your completed I-9. Please return copies of
supporting identification(s) specified on the Form I-9 or be prepared to provide
them on your first day of employment.
This letter contains all of the details relating to our offer of employment. No
one has the authority to modify or add new terms or conditions without the
signed approval of an OSI officer. Please feel free to contact me at (916) 353-
2400, extension 2773, if you have any questions or concerns. This offer will be
rescinded within seven working days if no reply is received.
Sincerely, Accepted by:
/s/ Philip N. Cardman /s/ Bud Mullanix
- ---------------------------- ----------------------------
Philip N. Cardman Bud Mullanix Date
Vice President
<PAGE>
EXHIBIT 10.11
OBJECTIVE SYSTEMS INTEGRATORS, INC.
SEVERANCE AGREEMENT
-------------------
THIS AGREEMENT is entered into as of March 15, 2000 ("Effective Date"), between
OBJECTIVE SYSTEMS INTEGRATORS, INC., a Delaware corporation ("OSI"), and BUD J
MULLANIX ("Officer").
RECITALS
--------
Officer serves as OSI's Vice President, Human Resources. The parties wish to
set forth the terms of Officer's compensation if his employment ends because of
a Change in Control. If a Change in Control occurs, Officer and other key
employees will be more vulnerable to dismissal without regard to the quality of
their service. Because key employees are in a unique position to affect the
efforts of others, OSI's Board of Directors ("Board") believes it is in the best
interests of OSI and its shareholders to ensure the fair treatment of key
employees and to reduce the adverse effects on their performance inherent in an
acquisition or a change in control.
AGREEMENT
---------
1. Definitions. For purposes of this Agreement, the following terms have the
-----------
meanings set forth below:
(a) a "Change in Control" will occur if (1) any person, as that term is
-----------------
used in Section 13(d) and 14(d)(2) of the Securities and Exchange Act
of 1934 ("Exchange Act"), other than OSI, is or becomes the beneficial
owner, as defined in Rule 13(d)3 under the Exchange Act, either
directly or indirectly (including by holding securities which are
exerciseable for or convertible into shares of OSI capital stock), of
50% or more of the combined voting power of the outstanding shares of
OSI's capital stock entitled to vote generally in the election of
directors (calculated as provided in Rule 13(d) under the Exchange Act
in the case of rights to acquire capital stock), whether by means of a
tender offer or exchange offer, a Transaction or otherwise, (2) a
Transaction is consummated, (3) the Continuing Directors do not
constitute a majority of the Board for any reason and at any time
during the term of this Agreement, or (4) a majority of OSI's Outside
Directors decide that a Change of Control has occurred.
(b) "Compensation" includes all wages, salary, bonuses and incentive
------------
compensation paid by OSI as consideration for the Officer's service
that are included in the Officer's gross income for federal income tax
purposes, but excludes any taxable income recognized on the exercise of
stock options or the disposition of shares acquired on the exercise of
stock options.
(c) a "Continuing Director" is (1) a member of the Board serving on
-------------------
December 15, 1999, or (2) a person who is thereafter elected by the
shareholders or appointed by the Board where the election or
appointment was approved by at least a majority of the Continuing
Directors then serving on the Board.
(d) "Disability" means that the Officer, in the reasonable judgment of the
----------
Board, is not able to perform the duties of his office by reason of
illness or physical or mental disability, where the condition has
continued for a period of more than three consecutive months.
(e) "Good Reason" includes any of the following:
-----------
(1) assignment to the Officer of significantly reduced duties, or a
substantial reduction in the nature or status of, the Officer's
responsibilities immediately before a Change in Control. In this
regard, a reduction in duties or responsibilities only by virtue
of OSI being acquired and made a part of a larger entity (as, for
example, the Chief Financial Officer of OSI remains as such
following the Change in Control and is not made the Chief
Financial Officer of the acquirer) will constitute "Good Reason"
<PAGE>
(2) reduction in the Officer's salary or a material reduction in his
other benefits taken as a whole, as in effect on the date of a
Change in Control.
(3) relocation of OSI's principal executive offices outside of the
Greater Sacramento area.
(4) relocation of the Officer to any place other than the principal
offices of OSI, except for reasonably required travel by the
Officer on OSI's business
(5) breach by OSI of this Agreement, if the breach has not been cured
within 30 days after notice setting forth with specificity the
nature of the breach.
(6) failure by OSI to obtain the assumption of this Agreement by any
successor or assign of OSI.
(f) "Outside Director" is a person who is not, and who during the past six
----------------
months was not, an employee or officer of OSI.
(g) "Termination for Cause" is termination of the Officer's employment as a
---------------------
result of (1) an act of intentional personal dishonesty by the Officer
in connection with his responsibilities as an employee and intended to
result in his substantial personal enrichment, (2) his conviction of a
felony, (3) a willful act by the Officer which constitutes gross
misconduct and which is more than of de minimus injury to OSI, or (4)
continued substantial violations of his employment duties (that have
been previously communicated to him in writing, are consistent with his
position as an Officer of OSI and that are neither illegal, immoral nor
wrongful), that are demonstrably willful and deliberate on his part and
that have continued for 30 days after OSI has delivered to him a
written demand for performance, specifically setting forth the factual
basis for OSI's belief that he has not performed his duties.
(h) "Termination on a Change in Control" is (1) termination by the Officer
----------------------------------
of his employment for Good Reason within two years after the occurrence
of a Change in Control, or (2) termination by OSI of the Officer's
employment within two years after the occurrence of a Change in Control
other than a Termination for Cause or a termination resulting from his
death or Disability.
(i) a "Transaction" is (1) a consolidation or merger involving OSI, other
-----------
than a merger solely to effect a reincorporation or a merger as to
which stockholder approval is not required under Sections 251(f) or 253
of the Delaware General Corporation Law, (2) a sale, lease, exchange or
other transfer (in one transaction or a series of related transactions)
of 50% or more of OSI's assets, or (3) the adoption of any plan or
proposal for the liquidation or dissolution of OSI.
2. Term. If no Change in Control has occurred, this Agreement will expire three
----
years from its Effective Date. This Agreement will be automatically renewed
for successive one-year periods unless either party has given the other six
months prior notice of its election not to renew. If a Change in Control
occurs, this Agreement will continue in effect, and will not terminate, until
the Officer has received the severance compensation provided for below.
3. Termination on a Change in Control. If a Termination for a Change in Control
----------------------------------
occurs, the Officer will immediately be paid all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other than
pension plan or profit sharing plan benefits, which will be paid in
accordance with the applicable plan), any benefits then due under any OSI
plans in which the Officer participates, accrued vacation pay and any
appropriate business expenses incurred by the Officer in connection with his
duties, all to the date of termination ("Accrued Compensation"). The Officer
will also be entitled to the severance compensation described in Section 4.
4. Severance Compensation. If a Termination on a Change in Control occurs, OSI
----------------------
will pay severance compensation to the Officer in an aggregate amount equal
to the Officer's Compensation for 12 months. Severance compensation will be
computed with reference to the Compensation paid to the Officer for the last
full calendar month immediately preceding the month in which the Change in
Control occurs or the month in which the Officer's employment terminates,
whichever is higher. Compensation as to any month will include one-twelfth
of the amount of any bonus or other lump sum compensation received by the
Officer
<PAGE>
during the preceding 12 months and all amounts accrued with respect to that
month under any deferred compensation plan. Severance compensation will be
without prejudice to the Officer's right to receive accrued Compensation
earned and unpaid at the time of termination. Severance compensation
payments to the Officer will be paid in a lump sum within 30 days after
Termination on a Change in Control.
5. Other Provisions. In addition to the severance payments described above,
----------------
the Officer will receive 100% OSI-paid benefits in the same or comparable
plans as provided to him immediately before the Termination on a Change in
Control. If the Officer's health insurance coverage included his dependents,
those dependents will also be covered at OSI's expense. Coverage under this
Section will continue for 12 months after termination; provided, however,
that coverage will end on the date the Officer and any covered dependents
become covered under any similar plan not maintained by OSI.
6. Acceleration of Options. If a Termination on a Change in Control occurs,
-----------------------
all stock option agreements will be amended to provide that the stock
options held by the Officer immediately before the termination will become
fully vested and exerciseable, even if the vesting conditions set forth in
the underlying stock option agreements have not been satisfied in full, and
will remain exerciseable for a period of 12 months after the Termination on
a Change in Control and for a period of 24 months if the termination results
from the Officer's Disability, but in no event longer than the original term
of the option.
7. Aggregate Benefit Cap. If the benefits provided for in this Agreement or
---------------------
otherwise payable to the Officer constitute "parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
("Code"), and will be subject to the excise tax imposed by Section 4999 of
the Code, the Officer will receive a payment from OSI sufficient to pay the
initial excise tax ("Gross-Up"), but no further payments from OSI with
respect to the Gross-Up. Unless OSI and the Officer otherwise agree in
writing, determination of the Officer's excise tax liability and the amount
required to be paid under this Section will be made, in writing, by the same
firm of independent public accountants who were employed by OSI immediately
before the Change of Control ("Accountants"). For purposes of making their
calculations, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999
of the Code. OSI and the Officer will furnish the Accountants with such
information and documents as the Accountants may reasonably request. OSI
will bear all costs the Accountants reasonably incur in connection with
these calculations.
8. Other Benefits. Neither this Agreement nor the severance compensation that
--------------
it provides for will reduce any amounts otherwise payable, or in any way
diminish the Officer's rights as an employee of OSI, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock
bonus or stock purchase plan or under any employment agreement or other plan
or arrangement.
9. Employment Status. This Agreement does not constitute a contract of
-----------------
employment. It does not impose on OSI any obligation to retain the Officer
as an employee, to change the status of his employment or to change OSI's
policies regarding termination of employment.
10. Miscellaneous.
-------------
(a) Severability. If a court or other body of competent jurisdiction
------------
determines that any term of this Agreement is invalid or
unenforceable, that term will be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible,
and all other terms of the Agreement will be deemed valid and
enforceable to the fullest extent possible.
(b) Withholding. Compensation and benefits to the Officer under this
-----------
Agreement will be reduced by all federal, state, local and other
withholdings or similar taxes as required by applicable law.
(d) Entire Agreement. This Agreement is the entire agreement between the
-----------------
parties with respect to its subject matter and may be amended,
modified, superseded or canceled, or its terms waived, only by a
written instrument executed by each party or, in the case of a waiver,
by the party waiving compliance. Failure of a party at any time to
require performance of any term of this Agreement will not affect the
right at a latter time to enforce the same. No waiver of a breach of
this Agreement, whether by conduct or otherwise, in any one or more
instances will be construed as a further or continuing waiver of the
breach or of any other term of this Agreement.
<PAGE>
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will constitute an original.
(d) Successors and Assigns. This Agreement will be binding on OSI, its
----------------------
successors and assigns, and will inure to the benefit of the Officer
and his estate, heirs, legal representatives and assigns.
(e) Notices. All notices, requests, demands and other communications
-------
under this Agreement will be in writing, will be effective on receipt
and will be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail or by facsimile
transmission. Addresses for notice to either party are as shown on the
signature page of this Agreement or as subsequently modified by
written notice.
(f) Jurisdiction. The parties each irrevocably consent to the
------------
jurisdiction of the courts of the State of California for all purposes
in connection with any action or proceeding arising out of or relating
to this Agreement. Any action instituted under this Agreement will be
brought only in the state courts of the State of California.
(g) Governing Law. This Agreement will be governed by, and its provisions
-------------
construed in accordance with, the laws of the State of California as
applied to contracts between California residents entered into and to
be performed entirely within California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of December 15,
1999.
OBJECTIVE SYSTEMS INTEGRATORS, INC.,
By: /s/ Richard G. Vento
-----------------------------
Title:
-------------------------
Date:
-------------------------
Address for Notices: 101 Park Way
Folsom, California 95630
Attention: General Counsel
OFFICER
/s/ Bud J. Mullanix
- ---------------------------------------
Bud J. Mullanix
Address for Notices:
<PAGE>
EXHIBIT 10.12
OBJECTIVE SYSTEMS INTEGRATORS, INC.
-----------------------------------
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT ("Agreement") is effective as of ______________,
by and between OBJECTIVE SYSTEMS INTEGRATORS, INC., a Delaware corporation
("OSI"), and BUD MULLANIX ("Indemnitee").
WHEREAS, OSI desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve OSI and its related entities;
WHEREAS, OSI and Indemnitee recognize the continued difficulty in obtaining
liability insurance for OSI's directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of that insurance and the
general reductions in the coverage of that insurance;
WHEREAS, OSI and Indemnitee further recognize the substantial increase in
corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited; and
WHEREAS, in connection with OSI's reincorporation, OSI and Indemnitee desire to
continue having in place the additional protection provided by an
indemnification agreement to provide Indemnitee with indemnification and
advancement of expenses to the maximum extent permitted by Delaware law;
NOW, THEREFORE, OSI and Indemnitee agree as set forth below.
1. Definitions.
-----------
(a) Change in Control. A "Change in Control" will be deemed to have occurred
-----------------
if, on or after the date of this Agreement, (1) any "person," as that
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Act"), or group acting in concert, other than a
trustee or other fiduciary holding securities under an OSI employee
benefit plan acting in that capacity or a corporation owned directly or
indirectly by the stockholders of OSI in substantially the same
proportions as their ownership of stock of OSI, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly,
of OSI securities representing more than 50% of the total voting power
represented by OSI's then outstanding Voting Securities, (2) during any
period of two consecutive years, individuals who at the start of the
period constitute the OSI Board of Directors, and any new director whose
election by the Board of Directors or nomination for election by OSI's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the start of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of OSI's Board of
Directors, (3) the OSI stockholders approve a merger or consolidation of
OSI with another corporation, other than a merger or consolidation that
would result in the OSI Voting Securities outstanding immediately before
the approval continuing to represent (either by remaining outstanding or
by being converted into Voting Securities of the surviving entity) at
least 80% of the total voting power represented by the Voting Securities
of OSI or the surviving entity outstanding immediately after the merger
or consolidation, or (4) the OSI stockholders approve a plan of complete
liquidation of OSI or an agreement for the sale or disposition by OSI (in
one transaction or a series of related transactions) of all or
substantially all of OSI's assets.
OSI Delaware Indemnification Agreement: Page 1
<PAGE>
(b) Claim. With respect to a Covered Event, a "Claim" is any threatened,
-----
pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of such
an action, suit, proceeding or alternative dispute resolution mechanism,
whether civil, criminal, administrative, investigative or other.
(c) OSI. References to "OSI" include, in addition to Objective Systems
---
Integrators, Inc., any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger to which
Objective Systems Integrators, Inc. (or any of its wholly owned
subsidiaries) is a party and which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees, agents or fiduciaries, so that if Indemnitee is or
was a director, officer, employee, agent or fiduciary of the constituent
corporation, or is or was serving at the request of the constituent
corporation as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise, Indemnitee will stand in the same position
under this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have stood with respect to the
constituent corporation if its separate existence had continued.
(d) Covered Event. A "Covered Event" is any event or occurrence related to
-------------
the fact that Indemnitee is or was a director, officer, employee, agent
or fiduciary of OSI, or any subsidiary of OSI, or is or was serving at
the request of OSI as a director, officer, employee, agent or fiduciary
of any other corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in that capacity.
(e) Expenses. "Expenses" are any and all expenses (including attorneys' fees
--------
and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, be a witness in or
participate in, any action, suit, proceeding, alternative dispute
resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if the settlement is
approved in advance by OSI, which approval will not be unreasonably
withheld) of any Claim and any federal, state, local or foreign taxes
imposed on Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(f) Expense Advance. "Expense Advance" is a payment to Indemnitee under
---------------
Section 3 of Expenses in advance of settlement or final judgment in any
action, suit, proceeding or alternative dispute resolution mechanism,
hearing, inquiry or investigation which is a Claim.
(g) Independent Legal Counsel. "Independent Legal Counsel" is an attorney or
-------------------------
firm of attorneys, selected in accordance with Section 2(d), who will not
have otherwise performed services for OSI or Indemnitee within the last
three years (other than with respect to matters concerning the rights of
Indemnitee under this Agreement or of other Indemnitees under similar
indemnity agreements).
(h) Other Enterprises. References to "other enterprises" include employee
-----------------
benefit plans; references to "fines" include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to
"serving at the request of OSI" include any service as a director,
officer, employee, agent or fiduciary of OSI which imposes duties on, or
involves services by, the director, officer, employee, agent or fiduciary
with respect to an employee benefit plan, its participants or its
beneficiaries; and if Indemnitee acted in good
OSI Delaware Indemnification Agreement: Page 2
<PAGE>
faith and in a manner Indemnitee reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee will be deemed to have acted in a manner "not opposed to
the best interests of OSI" under this Agreement.
(i) Reviewing Party. Subject Section 2(d), a "Reviewing Party" is any person
---------------
or body appointed by the Board of Directors in accordance with applicable
law to review OSI's obligations under this Agreement and under applicable
law, which may include members of OSI's Board of Directors, Independent
Legal Counsel or any other person or body not a party to the particular
Claim for which Indemnitee is seeking indemnification.
(j) Section. Unless otherwise indicated, "Section" refers to a section of
-------
this Agreement.
(k) Voting Securities. "Voting Securities" are any securities of OSI that
-----------------
vote generally in the election of directors.
2. Indemnification.
---------------
(a) Expense Indemnification. Subject to the provisions of Section 2(b), OSI
-----------------------
will indemnify Indemnitee for Expenses to the fullest extent permitted by
law if Indemnitee was, is or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part
out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of those
Expenses.
(b) Review of Obligations. Notwithstanding the foregoing, if any Reviewing
---------------------
Party has determined (in a written opinion where Independent Legal
Counsel is the Reviewing Party) that applicable law prohibits Indemnitee
from being entitled to be indemnified under this Agreement, (1) OSI will
have no obligation under Section 2(a) to make further payments to
Indemnitee after the determination by the Reviewing Party, and (2) OSI
will be entitled to be reimbursed by Indemnitee (who agrees to reimburse
OSI) for all Expenses previously paid to Indemnitee to which Indemnitee
is not entitled; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that applicable law permits
Indemnitee to be indemnified under this Agreement, the determination made
by the Reviewing Party that Indemnitee is not entitled to be indemnified
will not be binding and Indemnitee will not be required to reimburse OSI
for any previously paid Expenses until a final judicial determination is
made with respect thereto (as to which all rights of appeal have been
exhausted or lapsed). Indemnitee's obligation to reimburse OSI for
Expenses will be unsecured and no interest will be charged.
(c) Unfavorable Determination; Binding Effect. If a Reviewing Party
-----------------------------------------
determines that applicable law substantively prohibits Indemnitee from
being indemnified under this Agreement, either in whole or in part,
Indemnitee may commence litigation seeking an initial determination by
the court or challenging the Reviewing Party's determination (or any
aspect of that determination, including the legal or factual bases for
it) and, subject to Section 15, OSI consents to service of process and to
appear in the litigation. Absent litigation, determinations by a
Reviewing Party will be conclusive and binding on OSI and Indemnitee.
OSI Delaware Indemnification Agreement: Page 3
<PAGE>
(d) Selection; Change in Control. If there has not been a Change in
----------------------------
Control, the Reviewing Party will be selected by the Board of Directors.
If there has been a Change in Control (other than a Change in Control
which has been approved by a majority of OSI's Board of Directors who
were directors immediately before the Change in Control), the Reviewing
Party for all matters concerning the rights of Indemnitee to
indemnification of Expenses under this Agreement, any other agreement or
under OSI's Certificate of Incorporation or Bylaws as now or later in
effect, or under any other applicable law, if desired by Indemnitee, will
be Independent Legal Counsel selected by Indemnitee and approved by OSI
(which approval will not be unreasonably withheld). Among other things,
Independent Legal Counsel will render its written opinion to OSI and
Indemnitee as to whether and to what extent applicable law permits
Indemnitee to be indemnified under this Agreement. OSI will abide by
that opinion, pay the reasonable fees of the Independent Legal Counsel
and indemnify fully that Counsel against all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement under it. Notwithstanding
any other provision of this Agreement, OSI will not be required to pay
Expenses of more than one Independent Legal Counsel for Indemnitee, and
that Independent Legal Counsel will be the Independent Legal Counsel for
all other Indemnitees unless (1) employment of separate counsel by one or
more Indemnitees has been previously authorized by OSI in writing, or (2)
an Indemnitee has provided OSI with a written statement that the
Indemnitee has reasonably concluded there may be a conflict of interest
between the Indemnitee and the other Indemnitees with respect to the
matters arising under this Agreement.
(e) Mandatory Payment. Notwithstanding any other provision of this Agreement
-----------------
other than Section 10, to the extent that Indemnitee has been successful
on the merits or otherwise, including, without limitation, the dismissal
of an action without prejudice, in defense of a Claim, Indemnitee will be
indemnified against all Expenses incurred by Indemnitee in connection
with the Claim.
3. Expense Advances.
----------------
(a) Obligation to Make Advances. OSI will make Expense Advances to
---------------------------
Indemnitee on receiving a written undertaking, by or on behalf of
Indemnitee, to repay the Advances if it is ultimately determined that
applicable law prohibits Indemnitee from being indemnified for them by
OSI.
(b) Form of Undertaking. The obligation to repay Expense Advances under
-------------------
Indemnitee's written undertaking will be unsecured and no interest will
be charged.
(c) Reasonable Expense Advances. For Expense Advances where Indemnitee has
---------------------------
made written demand to OSI in accordance with this Agreement, all
Expenses included in the Expense Advance will be presumed conclusively to
be reasonable if they are certified as being so by affidavit of
Indemnitee's counsel.
4. Procedures for Indemnification and Expense Advances.
---------------------------------------------------
(a) Timing. All Expense payments (including, without limitation, Expense
------
Advances) by OSI to Indemnitee under this Agreement will be made to the
fullest extent permitted by law as soon as practicable after written
demand by Indemnitee is presented to OSI. In no event, will payment be
made later than 30 business days after written demand, except for Expense
Advances, which will be made no later than 10 business days after written
demand.
OSI Delaware Indemnification Agreement: Page 4
<PAGE>
(b) Notice/Cooperation. As a condition precedent to indemnification or the
------------------
receipt of Expense Advances, Indemnitee will give OSI notice as soon as
practicable of any Claim made against Indemnitee for which
indemnification under this Agreement could be sought. Notice will be
directed to OSI's Chief Executive Officer at the address shown on the
signature page of this Agreement (or such other address as OSI designates
in writing to Indemnitee). In addition, Indemnitee will give OSI such
information and cooperation as OSI may reasonably require and is within
Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement, the
--------------------------------
termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or on a plea of nolo contendere or
---------------
its equivalent, will not create a presumption that Indemnitee failed to
meet any particular standard of conduct or had any particular belief, or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of a
Reviewing Party to have determined whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an
actual determination by a Reviewing Party that Indemnitee has not met
that standard of conduct or did not have that belief, before the start of
legal proceedings by Indemnitee to secure a judicial determination that
Indemnitee should be indemnified under this Agreement under applicable
law, will be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met a particular standard of conduct or did not have a
particular belief. In connection with a determination by a Reviewing
Party, or otherwise, as to whether applicable law permits Indemnitee to
be indemnified under this Agreement, the burden of proof will be on OSI
to establish that Indemnitee is not entitled to indemnification.
(d) Notice to Insurers. If, at the time OSI receives notice of a Claim under
------------------
Section 4(b), OSI has liability insurance in effect which may cover the
Claim, OSI will give prompt notice that the Claim has commenced to the
insurers according to the procedures set forth in each respective policy.
OSI will thereafter take all necessary or desirable action to cause the
insurers to pay, on behalf of Indemnitee, all amounts payable under the
policies as a result of the Claim.
(e) Selection of Counsel. If OSI is obligated under this Agreement to
--------------------
provide indemnification for, or make any Expense Advances with respect
to, the Expenses of a Claim, if appropriate OSI may assume the defense of
the Claim with counsel approved by Indemnitee (which approval will not be
unreasonably withheld) on the delivery of notice to Indemnitee stating
OSI's election to do so. After delivery of the notice, approval of
counsel by Indemnitee and retention of counsel by OSI, OSI will not be
liable to Indemnitee for the fees or expenses of separate counsel
thereafter retained by or on behalf of Indemnitee in connection with the
same Claim; provided, however, that (1) Indemnitee may employ separate
counsel in the Claim at Indemnitee's expense, and (2) if (A) Indemnitee's
employment of separate counsel has been previously authorized by OSI, (B)
Indemnitee has reasonably concluded that there may be a conflict of
interest between Indemnitee and OSI in the conduct of the defense, or (C)
OSI does not continue to retain such counsel to defend the Claim, then
the fees and expenses of Indemnitee's separate counsel will be Expenses
for which Indemnitee may receive indemnification or Expense Advances
under this Agreement.
5. Additional Rights; Nonexclusivity.
---------------------------------
(a) Scope. OSI will indemnify the Indemnitee to the fullest extent permitted
-----
by law, notwithstanding that the indemnification is not specifically
authorized by the other provisions of this Agreement, OSI's Certificate
of Incorporation, OSI's Bylaws or by statute. If any applicable law,
statute or rule changes after the date of this Agreement,
OSI Delaware Indemnification Agreement: Page 5
<PAGE>
and the change expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or
fiduciary, it is the intent of the parties that Indemnitee will enjoy by
this Agreement the greater benefits afforded by the change. If any
applicable law, statute or rule changes after the date of this Agreement,
and the change narrows the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or
fiduciary, the change, to the extent not otherwise required by the law,
statute or rule to be applied to this Agreement, will have no effect on
this Agreement or the parties' rights and obligations under it except as
set forth in Section 10(a).
(b) Nonexclusivity. The indemnification and the payment of Expense Advances
--------------
provided by this Agreement (1) is in addition to any rights to which
Indemnitee may be entitled under OSI's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware or
otherwise, and (2) will continue as to Indemnitee for any action taken or
not taken while serving in an indemnified capacity even though Indemnitee
may later cease to serve in that capacity.
6. No Duplication of Payments.
--------------------------
OSI will not be liable under this Agreement to make any payments to the
extent Indemnitee has otherwise actually received payment (under an insurance
policy, provision of OSI's Certificate of Incorporation, Bylaws or otherwise)
of the amounts otherwise payable.
7. Partial Indemnification.
-----------------------
If Indemnitee is entitled to indemnification by OSI under this Agreement for
some or a portion of Expenses incurred in connection with a Claim, but not
for the total amount of those Expenses, OSI will nevertheless indemnify
Indemnitee for the portion of the Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment.
---------------------
In certain instances, Federal law or applicable public policy may prohibit
OSI from indemnifying its directors, officers, employees, agents or
fiduciaries, whether under this Agreement or otherwise. OSI has undertaken,
and may hereafter be required undertake, with the Securities and Exchange
Commission to submit the question of the application of public policy to
OSI's indemnification of its officers and directors to a court of competent
jurisdiction.
9. Liability Insurance.
-------------------
To the extent OSI maintains liability insurance applicable to directors,
officers, employees, agents or fiduciaries, Indemnitee will be covered by
those policies in such a manner as to provide Indemnitee the same rights and
benefits as are provided to the most favorably insured of OSI's directors, if
Indemnitee is a director; or of OSI's officers, if Indemnitee is not a
director of OSI but is an officer; or of OSI's key employees, agents or
fiduciaries, if Indemnitee is not an officer or director but is a key
employee, agent or fiduciary.
OSI Delaware Indemnification Agreement: Page 6
<PAGE>
10. Exceptions.
----------
Notwithstanding any other provision of this Agreement, OSI will not be
obligated under this Agreement:
(a) Excluded Action or Omissions. To indemnify or make Expense Advances to
----------------------------
Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving
indemnification under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances
------------------------------
to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim,
except (1) with respect to actions or proceedings brought to establish
or enforce a right to indemnification under this Agreement, any other
agreement or insurance policy or under OSI's Certificate of
Incorporation or Bylaws now or hereafter in effect relating to Claims
for Covered Events, (2) in specific cases if the Board of Directors has
approved the initiation or bringing of the Claim, or (3) as otherwise
required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be
entitled to the indemnification, Expense Advances or insurance
recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred
------------------
by the Indemnitee with respect to any action instituted (1) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over the action determines as provided in Section 13 that
each of the material assertions made by the Indemnitee as a basis for
the action was not made in good faith or was frivolous, or (2) by or in
the name of OSI to enforce or interpret this Agreement, if a court
having jurisdiction over the action determines as provided in Section
13 that each of the material defenses asserted by Indemnitee in the
action was made in bad faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
--------------------------
the payment of profits arising from the purchase and sale by Indemnitee
of securities in violation of Section 16(b) of the Securities Exchange
Act of 1934, as amended, or any similar successor statute.
11. Expenses in Actions Relating to Enforcement or Interpretation.
-------------------------------------------------------------
If any action is instituted by Indemnitee under this Agreement or under any
liability insurance policies maintained by OSI to enforce or interpret any
of the terms hereof or thereof, Indemnitee will be entitled to be
indemnified for all Expenses incurred by Indemnitee with respect to the
action (including without limitation attorneys' fees), regardless of
whether Indemnitee is ultimately successful in the action, unless as a part
of the action a court having jurisdiction over the action makes a final
judicial determination (as to which all rights of appeal have been
exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for the action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination
is made, Indemnitee will be entitled under Section 3 to receive payment of
Expense Advances hereunder with respect to the action. If an action is
instituted by or in the name of OSI under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee will be entitled
to be indemnified for all Expenses incurred by Indemnitee in defense of the
action (including without limitation costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in the action),
unless as a part of the action a court having jurisdiction over the action
makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in the action was made in bad faith or was
frivolous; provided, however, that until
OSI Delaware Indemnification Agreement: Page 7
<PAGE>
such final judicial determination is made, Indemnitee will be entitled
under Section 3 to receive payment of Expense Advances hereunder with
respect to the action.
12. Period of Limitations.
---------------------
No legal action will be brought and no cause of action will be asserted by
or in the right of OSI against Indemnitee, Indemnitee's estate, spouse,
heirs, executors or personal or legal representatives after the expiration
of two years from the date of accrual of the cause of action, and any claim
or cause of action of OSI will be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two year
period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, the shorter period will
govern.
13. General.
-------
(a) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will constitute an original.
(b) Binding Effect; Successors and Assigns. This Agreement will be binding
--------------------------------------
upon and inure to the benefit of and be enforceable by the parties and
their respective successors, assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of OSI), spouses, heirs and
personal and legal representatives. OSI will require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial
part, of the business or assets of OSI, by written agreement in form
and substance satisfactory to Indemnitee, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent
that OSI would be required to perform if no such succession had taken
place. This Agreement will continue in effect regardless of whether
Indemnitee continues to serve as a director, officer, employee, agent
or fiduciary (as applicable) of OSI or of any other enterprise at OSI's
request.
(c) Notice. All notices, requests, demands and other communications under
------
this Agreement will be in writing and will be deemed duly given (1) if
delivered by hand and signed for by the party addressed, on the date of
delivery, or (2) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date
postmarked. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by
written notice.
(d) Consent to Jurisdiction. OSI and Indemnitee each hereby irrevocably
-----------------------
consent to the jurisdiction of the courts of the State of Delaware for
all purposes in connection with any action or proceeding which arises
out of or relates to this Agreement and agree that any action
instituted under this Agreement will be commenced, prosecuted and
continued only in the Court of Chancery of the State of Delaware in and
for New Castle County, which will be the exclusive and only proper
forum for adjudicating such a claim.
(e) Severability. The provisions of this Agreement will be severable if
------------
any of provisions (including any provision within a single section,
paragraph or sentence) is held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, and the remaining
provisions will remain enforceable to the fullest extent permitted by
law. Furthermore, to the fullest extent possible, the provisions of
this Agreement (including without limitation each portion of this
Agreement containing any provision held to be invalid, void or
OSI Delaware Indemnification Agreement: Page 8
<PAGE>
otherwise unenforceable, that is not itself invalid, void or
unenforceable) will be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(f) Choice of Law. This Agreement, and all rights, remedies, liabilities,
-------------
powers and duties of the parties to this Agreement, will be governed by
and construed in accordance with the laws of the State of Delaware as
applied to contracts between Delaware residents entered into and to be
performed entirely in the State of Delaware without regard to
principles of conflicts of laws.
(g) Subrogation. In the event of payment under this Agreement, OSI will be
-----------
subrogated to the extent of the payment to all of the rights of
recovery of Indemnitee, who will execute all documents required and
will do all acts that may be necessary to secure those rights and to
enable OSI effectively to bring suit to enforce those rights.
(h) Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement will be effective unless it is in
writing signed by both the parties. No waiver of any of the provisions
of this Agreement will be deemed to be or will constitute a waiver of
any other provisions (whether or not similar), nor will any waiver
constitute a continuing waiver.
(i) Integration and Entire Agreement. This Agreement sets forth the entire
--------------------------------
understanding between the parties and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to its subject matter between the parties.
(j) No Construction as Employment Agreement. Nothing in this Agreement
---------------------------------------
will be construed as giving Indemnitee any right to be retained in the
employ of OSI or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties have executed this Indemnification Agreement as
of the date first above written.
OBJECTIVE SYSTEMS INTEGRATORS, INC. INDEMNITEE:
By: /s/ Philip N. Cardman /s/ Bud J. Mullanix
------------------------------- -------------------------------------
(signature)
Print Name: Philip N. Cardman Print Name: Bud J. Mullanix
----------------------- --------------------------
Title: Vice President and General Title: Vice President Human Resources
---------------------------- -------------------------------
Counsel
----------------------------
Address: 101 Park Way Address:
Folsom, California 95630
OSI Delaware Indemnification Agreement: Page 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
2000 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCJH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> JAN-01-2000 JUL-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 24,075 24,075
<SECURITIES> 16,667 16,667
<RECEIVABLES> 19,676 19,676
<ALLOWANCES> (2,280) (2,280)
<INVENTORY> 0 0
<CURRENT-ASSETS> 59,857 59,857
<PP&E> 0 0
<DEPRECIATION> (24,764) (24,764)
<TOTAL-ASSETS> 72,921 72,921
<CURRENT-LIABILITIES> 27,074 27,074
<BONDS> 0 0
0 0
0 0
<COMMON> 93,098 93,098
<OTHER-SE> (47,251) (47,251)
<TOTAL-LIABILITY-AND-EQUITY> 45,847 45,847
<SALES> 0 0
<TOTAL-REVENUES> 17,369 46,452
<CGS> 4,265 13,375
<TOTAL-COSTS> 17,442 51,475
<OTHER-EXPENSES> (445) (1,036)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 372 (3,987)
<INCOME-TAX> 98 353
<INCOME-CONTINUING> 274 (4,340)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 274 (4,340)
<EPS-BASIC> 0.01 (0.12)
<EPS-DILUTED> 0.01 (0.12)
</TABLE>
